ISLAMABAD: Prime Minister Shehbaz Sharif on Wednesday directed the authorities concerned to immediately confiscate all luxury vehicles being plied despite expiry of their Carnet-de-Passage limit (CPD) (permit for temporary import).

A Carnet-de-Passage is an international agreement between two countries that allows the temporary importation of a car without paying the customs duties.

The prime minister also ordered to seize all high-priced luxurious non-custom duty paid vehicles which were being plied without any check in the country.

The prime minister took notice of such vehicles while chairing a special meeting on the matter. He also questioned as to why the relevant departments failed to act against such vehicles well in time. He also directed formation of an inquiry committee to take strict action against the officials found involved in misuse of the scheme or those who showed negligence in this regard.

Forms an inquiry committee to take strict action against officials involved in misuse of scheme

The prime minister asked the Federal Board of Revenue (FBR) to compile the data of such vehicles which had completed their allowed limit under the scheme.

He was briefed on the method of entry and exit of such vehicles.

During the meeting, the luxury vehicles were also pointed out which were still being used despite the expiry of the Carnet-de-Passage limit.

The CPD is an international customs declaration identifying the vehicle crossing country borders on its route. This action of crossing borders consequently may imply several temporary importations throughout the journey.

A CPD is a globally insured customs guarantee document confirming that customs duties and taxes will be paid in case the vehicle does not return to the country of registration. Once the CPD has been used and is no longer needed, before its expiry date, the vehicle owner can return it back to the CPD-issuing organisation in the country of vehicle registration. At the same time he will be refunded the guarantee deposit he paid when the CPD (trip ticket) was issued.

Dawn has also learnt that on the one hand the government is striving hard to fetch more and more taxes by expanding tax net to overcome prevailing economic crisis, on the other billions of rupees import duty on high-priced luxurious vehicles is being evaded every year under a covert modus operandi of importing such four-wheelers in connivance with some foreign diplomats, representatives of international NGOs, armed forces personnel/military attaches of few countries and local officials.

Source said the Federal Board of Revenue (FBR), has already taken up the matter with the Ministry of Foreign Affairs (Mofa) asking it to write letter to all foreign embassies and international NGOs to ascertain their internal criteria of importing luxury vehicles for diplomats and other foreign nationals who are exempted from import duty while importing vehicles for their use during stay in Pakistan.

The FBR has received reports that the facility of duty free import of vehicles was being “misused” by certain embassies/diplomatic missions by importing vehicles over and above their actual requirements. The ministry was urged, through a letter, to revisit the existing regime of duty free import of vehicles by embassies, diplomatic missions and dignitaries.

The modus operandi of evading billions of rupees import duty is that the vehicles are imported by a diplomat, representative of international NGOs and military personnel/attaché of different countries, who stay in Pakistan for a specific period, but the actual owner of the vehicle is said to be a Pakistani acting behind the scene.

“It has come to the notice of the FBR that the vehicles are handed over to unauthorised persons for use and, later after lapse of sometimes, these are sold by diplomats to the so-called local owners,” the letter said.

As foreign diplomats, representatives of international NGOs, armed forces personnel of various countries are exempted from import duty, therefore, the vehicles they import are plied with diplomatic registration number plate for three years and afterwards [as imported duty is not levied on three or more than three years old vehicles] these vehicles are transferred in the name of actual owner (Pakistani).

For instance, the price of a Lexus SUV is Rs10 million and the import duty [which is 300 per cent more than the vehicle’s price] which is said to be Rs30 million is evaded. In the whole process, the importer [diplomat/military attaché] gains monetary benefit and the actual owner [Pakistani] gets the vehicle at far lower price than its market value. The market price of Lexus is said to be over Rs80 million but it is purchased by Pakistani owner at cost ranging between Rs20 to Rs25 million.

According to senior officials of vehicle registration authority Islamabad, there is an upward trend in the scam since 9/11 when the government allowed diplomats to use covered registration number plates [start with the alphabets QL, QM, and QN] due to security reasons. “Now cars are imported by diplomats and they are misused by Pakistani owner with covered number plates,” an official said with a condition of anonymity.

It has also been learnt that in some cases diplomats issue fake appointment letters to Pakistani owners pretending that they [Pakistani owners] are drivers of the embassies.

Published in Dawn, April 20th, 2023