Govt likely to withdraw tax exemptions granted through SROs

ISLAMABAD: The government plans to cut customs duty on import of up to three-year-old automobiles of all capacities and to withdraw a number of tax exemptions being enjoyed by various groups through discriminatory statutory regulatory orders (SROs) in the next budget. A minister told journalists at a briefing that the government had in fact decided in principle to reduce duty on vehicles of different engine capacities to be imported under various schemes. “For example, 150 per cent customs duty on import of bigger vehicles is too much and unnatural. So the duty reduction will be across-the-board, but obviously the cut will be significantly bigger on big vehicles and smaller on small ones,” he said. He clarified that by allowing bigger duty reduction on luxury vehicles the government did not want to favour rich people but it was because that the space for reducing 150pc duty was greater than cutting it from 45pc to 40pc on small cars. Vehicles having a capacity of over 2000cc are liable to 150pc duty. “The duty reduction will be across-the-board, for 800cc, 1300cc, 1800cc and even 3000cc and above but with varying percentage,” he said, adding that the age of vehicles would remain unchanged at up to three years. He said the government had to clear some older vehicles in the past, but it was because of the Federal Board of Revenue’s fault and it would not be repeated now. He said the issue of duty reduction was on the agenda of a meeting of the Economic Coordination Committee of the cabinet last week, but it could not be taken up. The ECC is expected to approve it in its next meeting. The minister said the government was trying to create a new classification of vehicles below 800cc capacity like 600cc and 700cc to encourage import of smaller cars like Indian Nano car. The focus would be on boosting revenue by increasing the number of vehicles rather than too much tax on fewer vehicles, he said. He said a special arrangement would also be made for duty rates with a marginal increase in engine capacity. For example, if duty on up to 1800cc vehicle is 90 per cent, it would not drastically increase to 120 per cent if engine capacity increased to 1801 or 1820cc. TAX EXEMPTIONS: The minister said the picture would become clear after detailed consultations, also with the International Monetary Fund, but “we have to do away with SROs quite significantly”. According to official estimates, about Rs480 billion revenue is lost every year due to a number of duty and tax exemptions through a series of SROs. The minister hinted at eliminating all exemptions in about three years. He said federal ministries had been asked to submit their proposals for the budget, not only related to their own area but also outside it. He conceded that the investment-cum-incentive scheme announced by the prime minister last year for tax exemptions to investment in a number of sectors had failed to produce any tangible outcome because of lack of tax culture in the country.