Locals-diplomats nexus misusing luxury car import facility
As the government is striving hard to fetch more and more taxes by expanding the tax net, it is being cheated out of billions of rupees in duty under a scam involving misuse of the facility of dutyfree import of luxury vehicles by some foreign diplomats, representatives of international non-governmental organisations and armed forces personnel of a few countries, according to sources.
The Federal Board of Revenue (FBR) has taken up the matter with the Ministry of Foreign Affairs (Mofa), asking it to write a letter to all foreign embassies and international NGOs to ascertain their criteria for importing luxury vehicles for diplomats and other foreign nationals, who are exempt from paying duty while importing vehicles for their use in Pakistan.
Through a letter, FBR chairman Shabbar Zaidi has informed Mofa of reports that the facility of duty-free import of vehicles is being "misused" by certain embassies or diplomatic missions by importing more vehicles than they actually require. The ministry has been urged to revisit the existing regime for duty-free import of vehicles by embassies, diplomatic missions and dignitaries.
According to the sources, the modus operandi of evading billions in duty is that vehicles are imported by diplomats, representatives of international NGOs or military personnel/attaché of different countries, but the actual owners of the vehicles are said to be Pakistanis.
"It has come to the notice of FBR that the vehicles are handed over to unauthorised persons for use and, later after a lapse of some time, these are sold to them," said Mr Zaidi's letter, of which media has obtained a copy.
As foreign diplomats, representatives of international NGOs and armed forces personnel of various countries are exempt from paying import duty, the vehicles they import carry diplomatic registration number plates for three years. As import duty is not levied on vehicles that are three years old or more, these vehicles are transferred in the name of its actual owner (a Pakistani) after that period.
For instance, the price of a Lexus SUV is Rs10 million. If a Pakistani imports it, he/she will be required to pay an import duty of Rs30m. But this amount can be saved if a person who is exempt from paying import duty imports it.