Local automakers join forces against under-invoiced imports

KARACHI: Local auto manufacturers and assemblers urged the Federal Board of Revenue (FBR) to crack down on imports of under-invoiced vehicles in Pakistan after an importer was alleged of evasion in duty and taxes for its low-priced British brand.

Pakistan Automotive Manufacturers Association (Pama), in a letter to the Member Customs (Operations), termed the FBR’s probe into under-invoicing as “commendable and ethical initiative which shall benefit the national exchequer in addition to enabling honest and fair competition, while advancing the country’s much-needed local industrialisation.”

Pama wants the inquiry to be expanded to all vehicles, including completely built unit (CBU) trucks and buses to ensure that there is no undervaluation/under-invoicing thus preserving the rule of law resulting in a level-playing field for local manufacturers and assemblers. The case involves a new entrant British automotive marque Morris Garages that imported over 500 CBUs, mainly MG GS Model from China. The customs value was declared at $11,632 per unit, while the same model is sold at $27,000 in other countries.

The company’s spokesperson, however, denied allegations of under-invoicing in auto imports. The spokesperson said MG Pakistan bought MG HS directly from its principal/manufacturer (SAIC). Since the actual / declared price was paid to the principal SAIC, it couldn’t be called under-invoicing.

“Ultimate beneficiary of the negotiated price is valued customers, a rare phenomenon in the Pakistani auto mobile sector,” said the official. MG Pakistan is a joint venture between JW SEZ and SMIL which is a subsidiary of SAIC Motor Corporation Ltd.

The FBR has also shared the under invoicing details with other departments and ministries for the proper action against the company. The case has also been forwarded to the customs intelligence.

One report said that over 400 CBU units were already imported and the company was accused of avoiding above Rs1.1 billion in duty and taxes.

Under invoicing in the trade with China is a major issue and according to the official figures, Pakistan faces around $2 billion of losses in duty and taxes every year, which has come down from $5 billion as both the countries use electronic data exchange facility to verify export value being declared in China for all high value items being imported into Pakistan.

Under invoicing is not limited to automobiles and China only it is spread to other trades and countries as well. Last year Pakistan Customs intensified its operation against the importers responsible for under-invoicing, over-invoicing and mis-declaration.

In one instance, the Customs had unearthed a big case of under-invoicing in which importers had established shell companies in Dubai, which were used for the transfer of amounts of the under-invoiced goods while the remaining amounts were transferred through Hawala/Hundi. Pakistan Customs is obtaining export documents, to avert under-invoicing, from major trading partners of Pakistan including China, UAE, Singapore, South Korea, and Hong Kong.