MG Motors Under Invoicing Scam: FBR to re-open investigation into the automaker’s operations

Here's everything we know so far.

According to media reports, the Public Accounts Committee has instructed the Federal Board of Revenue (FBR) to restart the investigation into the MG Motors vehicle import & under-invoicing scandal. The issue was first investigated in 2021 when the automaker allegedly under-invoiced the import value of its Completely Built-Up Units (CBUs) and was engaged in tax embezzlement.

Recap of the 2021 Investigation

As per the reports at that time, FBR had managed to procure “documents” that the company had significantly understated the customs value of the MG HS vehicle, which was priced at $11,632 in Pakistan. In contrast, the same vehicle was priced at over $27,000 in the rest of the world. By the time the investigation was initiated, the Chinese company had already imported 400 units. Some estimated that the alleged scam potentially cost billions of rupees to the national treasury.

During last year, around 10,000 vehicles were imported by MG Motors. Reportedly, the vehicles were highly under invoiced, while the declared value of a CBU vehicle was drastically less than even the CKD kits of the same vehicle. That interestingly means that a vehicle in finished form was cleared at Karachi Port against a value even less than its non-assembled components.

The MG import scam was a nexus between Azam Khan, ex-Secretary to the then PM, Tariq Huda, Member (Customs-Operations) FBR, and Javed Afridi (MG Motors). Azam Khan and Tariq Huda collaborated to extend the illegal benefit to Javed Afridi, and their close nexus was well known during the previous regime. Accordingly, Tariq Huda being Member, personally pressurized the officers at Customs clearance Collectorates in Karachi who resisted such clearances to ensure that the vehicles were cleared at the highly under-invoiced declared value. The loss due to under-assessment is reportedly around Rs. 8-10 Billion.

Javed Afridi’s Attempt to Cover Investigation Rumors

Javed Afridi is a key figure behind MG Motors Pakistan. When the company was facing the under-invoicing probe, he took to Twitter to state:

As the new entrants bring in exciting new models at far lower prices instead of the competition, we expect maligning campaigns and baseless rumors. While competition is an unfamiliar phenomenon in Pakistan’s automobile industry, we invite everyone to join in a fair competition to serve Pakistani consumers with bigger and better variety of vehicles at lower prices.

Investigation to Begin Again

While the FBR had closed the MG case in 2021 after confirming that the reports were false, it has been ordered by the new government to further probe into the matter. The committee has demanded a report within a month.

Last year MG was also accused of fraud by its customers. Amidst facing delivery delays, several customers came forth claiming that until they paid On-Money/ Premium, the company kept delaying the delivery. Following the allegations, the company came along and blamed the delays in delivery on the shortage of semiconductor chips.

Earlier this year, Karachi’s consumer court also fined MG for delaying vehicle deliveries. MG is expected to begin full-scale assembly of its vehicles in Pakistan. So far, the company has been dealing in CBUs only.

In response to the re-opening of the probe, Javed Afridi took to Twitter and said:

We welcome this and are ready for any investigation. We have the right to defend ourselves & will prove that all transactions are legal/valid. By doing this, you are also a part of a conspiracy against Chinese investment in Pakistan. Let truth prevail.

In another Tweet, Afridi once again reminded everyone that they reserve the right to take anyone to court who defames & spreads fake news about the MG brand in Pakistan. He said:

Let the court/PAC give its judgment & we will deal with these blackmailers & enemies of Pak-China Friendship through court.

Despite all court warnings from Javed Afridi, the FBR is all set to begin an investigation into the automaker’s operations again. Will the investigation unravel false details again or come to an accurate conclusion? Only time will unveil what truly lies in MG’s destiny.

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