Auto industry has opposed the proposed 5 percent withholding tax on vehicles terming it a severe blow to an industry which is already fighting hard for its survival. Vice-Chairman of Pakistan Auto Manufacturers Authorised Dealers Association (PAMADA) Iqbal Hussain Shah criticised the proposed move and said that this step will escalate prices of different models of cars by thousands of rupees, besides adversely affecting the already declining sales of automobiles.
He said that the auto industry was trying to recover from a significant sales drop in the past two years, but the task was made difficult by the government's hostile policies, including import of used cars and providing amnesty on smuggled vehicles, towards the industry during this period.
"During the first 10 months of FY2012-13, sales of local cars fell 24 percent year-on-year as more than 40,000 units of used cars were imported during that period whereas the figure was 55,000 in FY2011-12," he said, adding that over 50,000 smuggled cars were registered under amnesty scheme to dampen the sales of local cars.
He expressed the hope that the government would stay away from such hostility towards manufacturing sector and formulate investor-friendly policies instead so that the auto industry could enhance its contribution to the national economy. "The auto industry, which contributes 2 percent to the country's GDP, does not expect such harsh measures from a business-friendly government as it would result in a sharp decline in sales," said DG PAMA, commenting on the proposed tax.
This will effectively cease expected investment in the industry besides the current automakers would consider reducing the numbers of their skilled workforce. He further said that industry's production slowed down against its capacity in the last two financial years and now the new taxes would further put the sustainability of the automobile sector companies in crisis. Hence, sales and revenues will not be maintained for longer period.
Chairman PAAPAM Munir Bana said that auto industry provides direct and indirect employment to around 2.2-million-strong skilled and unskilled workforce, but over 25,000 skilled technicians lost their jobs at dozens of small- and medium-sized vending units of the automobile industry because of a significant drop in demand.
"Sadly, the same blow is to be faced again with the imposition of new taxes. The government should take all stakeholders on board to devise long-term investment-friendly policies and provide a level playing field to the automobile industry because this will help the industry gain its pace to attract foreign and local investment to generate thousands of employment opportunities," he said. He urged the government to avoid new levies on the automobile industry in the larger interest of the nation and restore the confidence of foreign and local investors.
"Government should give a lease of life to the automobile industry which has been providing livelihood to millions of people directly and indirectly," he said, adding that if the automobile industry flourished, revenues of the government, investment inflows and job generation would increase by leaps and bounds automatically in the future.