Used cars imports and tax policy | Political Economy

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Depending on the context and the stakeholder, duties related to car imports used in Pakistan will have far -reaching effects for the domestic car industry.

Imported used cars, especially Japanese brands, are often of high quality, are better equipped with locally accumulated and cheap. Consumers can move into them, which can reduce sales of local collectors like Suzuki, Toyota and Honda. After duty rational करण prices will expand.

Used Japanese cars

There is a common misconception about used Japanese car. Japanese consumers do not abandon cars because they defect or pollute. In fact, their used cars are often in good shape.

Japan has a tough (and expensive) vehicle inspection system. A car must be inspected at the age of 3. The higher the age of the car, the more expensive it is to maintain and pass the inspection. Maintaining the old car can be much more expensive than a new buying, partially due to high cost repair and insurance. Even minor repairs or cosmetic damage can make it financially unimaginable to maintain old cars.

Another reason is high -speed technical upgrade. Japanese consumers are tech lover and prefer the latest models that offer maximum safety, communication and fuel economy. Even older models are obsolete in their eyes.

In Japan, the cars are rapidly outdated, even as they are mechanically stable. There is little motivation to stop old cars when financing options are easy for new cars. In order to reduce urban crowds and emissions, Japanese citizen policies often discourage long -term ownership.

Local industry

If collectors and parts manufacturers face uncertainty or shrinking demand due to cheap used imports, they can reduce investment in local production, innovation or localization efforts. Pakistan has a tired auto parts vendor industry that provides parts to collectors. Local car production will damage auto parts manufacturers, which will reduce employment and reduce industrial activity.

In the long term, import of used cars (a consumption activity) can help in de -industrialization by replacing local manufacturing (a productive activity).

The profession and in agreement

Low duties on used cars will increase the variety of cars and cheapness of better quality cars for medium income buyers, especially hybrids and small cars that were not available in the country. For decades, local Pakistani car collectors have been accused of offering outdated models, poor standards and high prices. Used imports can force them to improve quality, localization and prices.

If duties are reduced and volume increases significantly, car imports will strengthen the government’s income or increase. Many imported cars are hybrids or fuel effective, and may include modern safety properties. This can improve road safety and reduce fuel import bills over time.

Unlike many local options, most of the used Japanese cars are in accordance with Euro 4 or euro 5, use hybrid technology and are well maintained due to Japan’s culture and regulatory framework. Pakistan’s locally accumulated cars often lack the hybrid version. Japanese used imports such as Toyota Pros, Witz Hybrids or Aqua’s improved fuel efficiency and low emissions are significantly better than many models of petrol collected locally.

For decades, local Pakistani car collectors have been accused of offering outdated models, poor standards and high prices. Used imports can force them to improve quality, localization and prices.

Pakistan is lagging behind in adopting the principles of modern emission (it went to the euro 5 fuel in 2020 but the implementation has been weak). Even the 7 -year -old Japanese hybrid used is potentially clean than a new local variety.

Japanese cars are not abandoned because they are unclean, but because it is expensive to keep them under the Japanese rules. Japan has a system that quickly recycles vehicles, even though they are quite effective. To import countries like Pakistan, these vehicles represent the upgrade in terms of technology, fuel performance and emission.

Cheap used cars will bring relief to consumers in a short period of time, but long -term industrial development goals can damage. One of the solutions is to allow only low duties on models that are not gathered locally, or on hybrids and EVs, pushing cleaner technology to protect local collectors.

The government can combine duty with policies to increase localization, improve technology and force low costs.

Reducing duties on used cars will hurt domestic car collectors and shopkeepers, potentially preventing industrial growth and localization. However, this will benefit consumers, possibly disciplined local producers and the overall quality and diversity of vehicles in the market. The policy decision depends on whether Pakistan prefers the welfare of the short -term consumer or the long -term industrial self -reliance.

The recent lack of duties on the used car has been due to the IMF’s push. The IMF generally emphasizes the elimination of ‘distorted’ taxes and taxes, including high duties on imports as part of the wider agenda of liberalization and revenue performance. The reduction of duties on the small cars used will help people with small, fuel -powered vehicles a bit cheaper, low and middle -income.

The duties of the luxury car

The reduction of duty on luxury cars at the same time benefits the wealthy. Saving Rs 10 million for a luxury car buyer is not the only loss of income, it is also a great reactionary advantage in this country that is already suffering from extreme inequality. Saving Rs 10 million on the same vehicle is a huge tax concession – enough to buy three or more small cars. This benefits a small elite group that has high purchase power and does not need such relief.

Even after duty reduction, small cars are mostly unstable for most families, which are unbearable for most families due to increasing wages for inflation and fuel/ rehabilitation costs. Unlike the rich, small car users rely on these vehicles for necessary movements – not luxury.

Dual deficiencies proposes a policy leading to the arrest of the elite – where the influential business lobby and wealthy policy policy is for their benefit. This disrupts public confidence, especially when the same government is preaching simplicity and increasing indirect taxes on necessary goods.

High -end vehicles are a low execution fruit to impose progressive taxes. Reducing duties on luxury imports during the financial crisis is economically and morally unforgivable – especially when public services, development costs and subsidies for the poor are being reduced.

For small cars (especially <1000 cc), possibly through the reduction of tredit duty, target relief. The state has to maintain or increase the duties of luxury cars. At least it should be binding duty relief from green/ carbon standards to stimulate electricity or hybrid vehicles.

The government can use income from luxury car imports to provide subsidy to public transport or local car assembly for cheap vehicles.

Author is a senior economic reporter at News International.