The Federal Board of Revenue (FBR) has shaken up the car market with significantly lower tax rates for individuals listed on the Active Taxpayers List (ATL) compared to those who aren’t. This move aims to incentivize tax compliance and expand the tax base.
What’s the Difference?
- ATL individuals: Enjoy substantially lower tax rates, up to 60% lower in some cases. For example, a new 1600cc car costs Rs.50,000 for ATL individuals, but a whopping Rs.150,000 for non-ATL.
- Non-ATL individuals: Face much higher tax rates, reaching up to 200% more than their ATL counterparts. These higher rates may significantly impact car affordability.
How are the Taxes Calculated?
- For smaller cars (up to 2000cc): Fixed rates apply based on engine capacity.
- For larger cars (above 2000cc): Taxes are a percentage of the car’s value, ranging from 6% to 10% for ATL individuals and 18% to 30% for non-ATL.
| 1. Up to 850 cc: | • ATL: Rs.10,000 | • Non-ATL: Rs.30,000 |
| 2. 851cc to 1000cc: | • ATL: Rs.20,000 | • Non-ATL: Rs.60,000 |
| 3. 1001cc to 1300cc: | • ATL: Rs.25,000 | • Non-ATL: Rs.75,000 |
| 4. 1301cc to 1600cc: | • ATL: Rs.50,000 | • Non-ATL: Rs.150,000 |
| 5. 1601cc to 1800cc: | • ATL: Rs.150,000 | • Non-ATL: Rs.450,000 |
| 6. 1801cc to 2000cc: | • ATL: Rs.200,000 | • Non-ATL: Rs.600,000 |
| 7. 2001cc to 2500cc: | • ATL: 6% of the value | • Non-ATL: 18% of the value |
| 8. 2501cc to 3000cc: | • ATL: 8% of the value | • Non-ATL: 24% of the value |
| 9. Above 3000cc: | • ATL: 10% of the value | • Non-ATL: 30% of the value |
What’s the FBR’s Aim?
- Encourage tax compliance: By offering generous tax breaks to ATL members, the FBR hopes to attract more individuals to join the official tax net.
- Expand the tax base: A wider tax base strengthens the government’s finances and supports economic growth.
What could be the Impact?
- Boosted ATL membership: The attractive tax benefits may incentivize non-ATL individuals to register.
- Shift in consumer behavior: Buyers may prioritize smaller, more affordable cars due to higher taxes on larger ones.
- Impact on the automotive industry: The new tax policy could affect car sales and preferences.
The FBR’s move marks a significant shift in car taxation, potentially influencing buyer behavior and the automotive industry landscape. Whether it successfully expands the tax base and strengthens fiscal discipline remains to be seen.
