Overview
The already struggling automotive industry has new heeds on increasing taxes. The Federal Government plans to raise Withholding Tax (WHT) on locally-made cars in the upcoming budget. The tax will be implemented on the basic invoice price, not the engine capacity.
The consequences of increasing taxes will be a hard burden on automakers, increasing their cost and the end price for customers. Car sales already decline almost 50% compared to the last month and the major reason behind this is a huge increase in car prices. Every change in taxes impacts the customer’s behavior and automakers suffer with it. The economic uncertainties directly impact the behavior of customers and change purchasing minds.
PAMA Highlight Negative Impacts
Pakistan Automotive Manufacturing Association (PAMA) has raised concerns about it and requested the federal government to not put this burden on automakers. PAMA has written a letter to the Chairman Federal Board of Revenue (FBR) and highlighted the after-effects of the increase of WHT. The latter has described the ongoing sharp downturn of car sales in the period of 2022-2023.
The already struggling automotive industry will face a serious impact if government adds a new layer of taxes. Automakers need support to face the complexity of sales and production.
Cars plants halted for multiple days due to the non-availability of stock. The shortage of stock and LCs issue made them suffer to produce vehicles and provide deliveries on time.
PAMA highlights the serious impacts of import restrictions on vehicle production. After beating COVID-19 the current situation has made more troubles to improve the sale graph.
Automotive Industry Losses
The automotive industry is almost reaching the peak of the challenging situation. Pakistan’s auto industry suffers from a shortage of inventory, devaluation of the rupee value, LCs issues, and rising in taxes percentage. All these issues were raised in the PAMA letter to FBR. The facts change the business environment and disturb the sale. Automakers are unable to provide deliveries on time. Meanwhile, in all this situation they are not in a position to make good deals or announce promotions for customers.
Conclusion
PAMA raised the current struggling image of the automotive industry to FBR Chairman after getting hints of their plan to increase WHT. The government is preparing a budget for 2023-2024. It’s necessary to show off the situation to not put car makers in more worst situations. They should know the potential ramifications before announcing any new burden of the tax.
