Local industry is like a backbone of any country. It plays a vital role in the economic development, it’s an import substitute, pays taxes, provides employment and saves millions of dollars. It is the responsibility of government to protect its local industry, said Chief Executive General Tyre Hussain Kuli Khan.
Local tyre industry is facing two major issues -smuggling and low Import Trade Price (ITP) values. “Extensive under-invoicing of imported Chinese tyres in Pakistan is causing huge tax losses to the government while at the same time it is a major obstacle to new investments in the local tyre industry,” said Hussain. He added that the market share of Chinese tyres in the passenger car category has increased over the last two years despite its inability to compete with Pakistani tyres in quality and durability. The imports of Chinese tyres in the passenger car category has increased to 300%. Similarly, the import of Chinese tyres for light trucks has increased by 150% in two years and their market share in this category has increased to 75%. Chinese tyres are also being imported for trucks buses radial and their market share in this segment has increased from 60% to 90% in the last two years.
He said the main reason for under-invoicing of Chinese tyres is their Import Trade Price (ITP) which has not changed since August 2018, although the price of raw materials and other factors have led to a significant increase in the international prices of tyres. “The loss to the government due to the non-revision of ITPs can be gauged from the ratio of imported tyres for truck buse radials, which accounted for 95 per cent of the 975,000 imported tyres in nine months. “For example, the ITP of one tyre (size 11.00 R-20) showed as $147 while the price of a well-known brand of tyres of the same size is $160. Thus, under-invoicing of only one tyre caused a loss of approx. Rs 7 million to the national exchequer,” Hussain said.
It is necessary to maintain regulatory duty and increase ITPs of imported tyres to prevent the national exchequer and local industry from a big damage, he maintained. He urged the government to increase 25% in the Import Trade Price (ITP) as it would generate additional revenue of Rs. 3 billion for the government. “Increase in ITPs will result in new investment at local level which in turn would increase employment opportunities,” said Hussain. He held that the Federal Board of Revenue could overcome the tax deficit by increasing the duty on imported tyres and adjusting the ITPs to the real prices of imported tyres.