Carmakers may be declared as withholding tax agents

The government may declare assemblers/manufacturers of motor vehicles and motorcycles as withholding tax agents to bring the entire auto industry into tax net, Business Recorder learnt on Tuesday.
The proposal has been put up by the committees on ''TBS and vendors industry competitiveness and efficiency improvement exercise budget 2007-08'', which was tasked to workout implementation modalities of non-tariff portion of the long-term auto policy.
The new auto policy had offered the industry five-year pre-announced tariff, help in setting up a fund worth Rs 6 billion for competitiveness, technology acquisition, research and development and two auto clusters, one in Lahore and another in Karachi, to enable it in achieving a production target of 0.5 million vehicles by 2011.
The committee drew the government attention towards sub-section 9 of section 153 of the Income Tax Ordinance wherein withholding income tax agents have been prescribed, proposing that car makers as well as vendors may be included as withholding agents to bring the entire motor vehicle industry and vendors into the tax net.
A mechanism was also proposed to review specially in the context of issues such as parts development, their inclusion in the localised list and technology upgradation on regular basis so that the same may be incorporated in the TBS after analysing the components manufacturing activity, supply position by developing a consensus among all the stakeholders.
A committee comprising both the auto industry and the EDB held a number of meetings wherein a comparative list showing difference of duties between Pakistan and India was also discussed at length and it was agreed that further indegnisation through expansion in vendor base should be a continuous process.
To this effect, it was suggested that a committee drawing members from parts manufacturers, OEMs, CBR and EDB be framed to address the issues pertaining to technology development, model change after reviewing the list under the said SRO.
It was also proposed that the concerned person dealing with the tariff issue would take the measures to minimise tariff lines under the TBS. The non-tariff policy incentives included productive investment incentives, an auto industry development committee, establishment of funds for the auto industry competitiveness, research and development, technology acquisition and a policy that has incentives for export.