Tax Drive Blamed for Decline in Car Sales

Any reduction in or removal of taxes imposed on locally assembled cars in the budget for the current fiscal year will not improve the situation of country’s automobile industry as sales have slumped mainly on account of the ongoing drive to document the economy and not owing to the rising prices of vehicles.

Related: 2019 was a Bad Year for Local Auto Industry

This was revealed by a top executive representing one of the three Japanese assemblers, while speaking to Dawn. He said out of every 100 car buyers in the past years, 48 used to be tax non-filers.

“This large segment of customers has suddenly disappeared from the market ever since the start of the tax drive. The industry booking data and sales numbers clearly reflect this phenomenon.”

This is probably the first time that an automaker has attributed the plunging car sales to the government’s campaign aimed at widening the tax net. Previously, two factors that drastically pushed the prices in the last two years — imposition of new taxes like federal excise duty of 2.5% to 7.5% on vehicles of different engine displacement and advance income tax of 7% on carmakers, as well as the rising interest rates were generally blamed for the depressing automobile sales.

The executive on the condition of anonymity because of his company’s policy, said:

“If you ask me I’d say the documentation drive was the biggest contributor to the slump. Its impact on our lost sales is huge, estimated to be around 75%. The remaining impact is caused by the hefty increase in car prices and the cost of leasing owing to higher interest rates or general economic slowdown in the country.”

Related: Can Increase in Car Prices Bring Desired Results?

Local automakers sold 43% less cars during the first 6 months of the current financial year compared from a year ago. Only 59,097 vehicles were sold during this period, compared to 104,038 vehicles sold last year. The official added on to say:

“What is more important for lifting the market sentiment is consistency in policy: the government should come clean on its future intentions about the taxes imposed on the industry. We need to know if these taxes are going to stay, reduce or increase next year or the year after that.”

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