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By Bloomberg

A Pakistan government panel recommended lower tariffs on cars to boost import volumes and tax revenue.

Import duty on all vehicles, including used cars, must be reduced by 5 percent while those on cars with engines of 1,800cc or higher must be slashed by 25 percent, Mohammad Zubair, a member of the panel, said in a phone interview on Wednesday.

Pakistan needs to boost tax collections as a percentage of gross domestic product to meet requirements under an IMF program. The move to make imported cars cheaper will hurt local manufacturers, according to Asad Nayani, an analyst at Global Securities Ltd. Automobile stocks fell.

“Preference of the customer will change to import in the higher segment,” Nayani said by phone from Karachi, adding that the 5 percent cut won’t have any major impact on cheaper vehicles. “This will be a dent to the local industry.”

Shares of Indus Motor Co Ltd., Toyota Motor Corp.’s Pakistan unit, fell 0.5 percent as of 12:55 p.m. in Karachi. Pak Suzuki Motor Co. briefly erased the day’s gains.

Due to tariffs of as high as 150 percent, annual imports of top-bracket sedans and SUVs had dropped below 2,000 over the past seven years from around 13,000, said Zubair, who’s also Pakistan’s privatization chief.

Import taxes on auto parts will be withdrawn if the companies start producing in Pakistan, he said. The new policy will also offer incentives to existing manufacturers, new entrants and auto component makers, Zubair had said in March.

The automobile policy will be part of Pakistan’s budget for the year starting July 1, due to be announced on June 5.