Government suffers huge revenue losses on account of malpractices

Government has reportedly suffered a huge revenue loss of Rs 429 million in the import of used hybrid cars during the first quarter of current fiscal year owing to alleged malpractices in their clearance by customs officials, it was learnt here on Monday. A market survey showed that hybrid vehicles being imported at much lower than their actual value were causing a negative impact on the duty that had already been halved under SRO 499.
The importers declared the value of 1496cc hybrid vehicle, including freight and insurance cost between US $16,000 - $17,000 per units, instead of US $23,500 per unit. According to sources, an engine of this capacity falls under the category of 1,500cc and hence attracts 60 per cent customs duty, 17pc sales tax, six pc income tax and additional income tax as mandated by the law applied on CNF price.
The importers of the vehicles got additional benefit by under invoicing while calculating duties and taxes. Though actual duty on these hybrids goes up to US $25,900 per unit, the duty assessed by the customs staff on under invoiced value comes to around US $17,900. Besides, these hybrid vehicles got additional benefit of 50pc reduction in duty under SRO 499 and as such each of its unit was cleared on the payment of US $8,950 per unit as against US $12,950 per unit.
Meanwhile, experts claimed that the country has been suffering revenue losses of around $4,000 per car and in just last three months, the losses had reached to US $40.83 million or Rs 429m mainly due to under invoicing during the clearance process of hybrid vehicles. Conservative estimates suggest that more than 2,300 used hybrid vehicles were imported during the first quarter of 2015-16, thereby indicating 125pc growth as compared to last corresponding period.
The sources said that certain issues overlooked by the government were seriously affecting the local auto industry and among them is its `flawed' used car import policy. The auto sector experts said that one the one hand, government was making efforts to attract new investors for the sector while, on the other, its own departments were creating hurdles by clearing mis-declared and under invoiced vehicles at ports.
They said that since used hybrid cars that fall under the category of luxury cars were imported by high end users, only the affluent class was accruing benefits of such unlawful practice. As a matter of fact, government was deliberately delaying the announcement of auto policy merely to encourage import of used cars, the sources opined.