ISLAMABAD: In pursuance of the explanation sought by Finance Minister Ishaq Dar, the Federal Board of Revenue (FBR) is busy in preparing reply to the reservations expressed by the Japanese automobile companies.
Japanese automobile companies have certain reservations regarding customs duties, withholding tax, refund and others and this time they used diplomatic channel to highlight their concerns and Japanese Ambassador Japanese Ambassador Hiroshi Inomata held a meeting with Finance Minister on October 29.
“Consequently, the Finance Minister sought stance from the FBR and FBR is preparing response to the said matter,” a well-placed official source at FBR told this scribe here on Tuesday. The source said that Japanese Ambassador would be holding another meeting with Finance Minister to get insight about FBR’s stance and further to convey to Japanese automobile companies involved in auto industry in Pakistan. “Most often Japanese companies have issues with FBR, Customs and repository regime of concerned ministries,” the source said adding that these companies often raise issues like high rate of custom duty on imported raw material from Japan, high rates of withholding tax, non refund of sales and income tax to companies.
The source said that Japanese automobile companies also criticized heavily charged and complex structure of Customs Duty and others and terming the system of filling income or sales tax as complex and inexplicit one. The source added that such complaints by foreign companies were very common in the developing countries because these companies termed such issues as main hurdle in their cash flow, whereas, the tax authorities and institutions often carry on such practices to keep the cash flow of the government as intact instead of taking care of the interests of corporate sector.
“FBR has a position that vehicles manufactured by Japanese companies are highly priced in Pakistan as compared to other areas of the world and these companies did not pay customs duties, withholding tax, sales tax and others out of their share of profit and transfer these taxes to the end consumer, therefore, these high or low ratio of taxes was not a matter of concern of these companies,” the source said.
It is pertinent to note here that currently some of the major world automakers Toyota, Honda, Suzuki, Nissan and others have set up assembly plants here and Auto sector presently, contributes 16% to the manufacturing sector which is predicted to increase 25% in the next 7 years. Major Japanese manufacturers entered in the market thereby creating some competition in this sector. Assemblers of HINO Trucks, Suzuki Cars (1984), Mazda Trucks, Toyota (1993) and Honda (1994) in particular, entered once deregulation was introduced. Assembly of Daihatsu and Hyundai cars (1999) and various brands of LCVs and range of mini-trucks commenced recently.