Motor vehicle tax collection falls 10% in first half

KARACHI: The motor vehicle tax collection by all the provinces declined 10 per cent during the first half (July-December) of the fiscal year 2022/23, owing to a massive fall in the car sales.

The collection of motor vehicle tax fell to Rs15.60 billion during the first half of the current fiscal year, compared with Rs17.41 billion in the same period of the last fiscal year, according to the statistics released by the Finance Ministry.

The country’s car sales dropped 38 per cent during the first half of the current fiscal year 2022/23 for non-production days due to the shortage of raw materials after the government imposed import restrictions.

The car sales fell to 84,088 units during July-December 2022, compared with 135,976 units in the same period of the last fiscal year, according to the data released by the Pakistan Auto Manufacturers Association (PAMA).

Analysts at Topline Securities attributed the decline to weak demand, high car prices, expensive auto financing, and low purchasing power of the customers.

The Finance Ministry also pointed out that the stamp duty collected by the provinces posted a decline of 4.17 per cent during the period under review.

The collection of stamp duty declined to Rs31 billion during the first half of the current fiscal year, compared with Rs32.4 billion in the same period of the last fiscal year.

The provinces collect stamp duty on transactions of sales and purchase of immovable properties.

Experts said that due to an economic slowdown and inflationary pressure, the property transactions also declined during the period under review.

The total tax collection by the provinces posted an increase of 12 per cent to Rs303 billion during July-December 2022, compared with Rs271 billion in the same period of the last fiscal year.

According to the Finance Ministry data, the collection of sales tax on services by the provinces recorded an increase of 28 per cent to Rs186.34 billion during the period under review, compared with Rs145.67 billion in the same period of the last fiscal year.

Tax experts attributed the jump in the provincial sales tax to a rise in the financial and other services during the year. Besides, the increase in the rates for the services also helped increase the tax collection.

The provinces collected Rs4.74 billion as excise duty during the period under review, compared with Rs4.26 billion in the same period of the last fiscal year, showing an increase of 11.26 per cent.

The provincial tax-to-GDP ratio during the first half of the current fiscal year slipped to 0.36 per cent, as the size of the GDP is Rs84,102 billion.

Meanwhile, the provincial tax-to-GDP ratio in the first half of the last fiscal year was 0.41 per cent, as the total GDP measured at Rs66.95 billion.