The government of Khyber-Pakhtunkhwa announced in its 2021-22 budget that, from July 1, 2021, it would levy a nominal cost of Re1 just for registering an automobile.
While this would alleviate people’ registration fee burdens, it was not intended to be a tax holiday, but rather a long-term change aimed at increasing provincial income.
Let me set the scene for you. The population of K-P has been increasing at a rate of 2.9 percent each year. Between 2013-14 and 2018-19, the average monthly income of urban households in K-P increased by about 23%. During the same time period, however, the number of cars registered in K-P decreased from 4,094 to only 892 each year. In reality, despite large increases in population and household income, vehicle registration in K-P has been falling at an alarming rate of over 10% every year.
This appears odd at first, but not when one considers the car registration data for Islamabad, which had 7,665 registered vehicles per 1,000 residents, compared to only 5 vehicles per 1,000 inhabitants in K-P.
Officials in K-P have long suspected Islamabad of stealing their vehicle registrations. However, this impression was formed based on hearsay. However, more recently, the government was assisted in solving this problem by the UKAID-funded Sustainable Energy and Economic Development (SEED) programme, with which I was involved. The organisation conducted a survey of over 1,500 vehicle-owning residents of K-P and discovered that just 27 out of every 100 citizens had registered their automobiles with the province. Around 55 persons had registered their vehicles in Islamabad, while 18 had registered them elsewhere. This resulted in a considerable income loss for the resource-based industries.
Why would residents of K-P want to register their automobiles in Islamabad? The key motivations of out-of-province registration, according to the poll, are the high resale value of Islamabad-registered automobiles, convenience of interprovincial travel, and a straightforward token tax payment process.
If this were to change, K-P would require a cutting-edge, trustworthy licence plate system with simple registration and token tax payment processes. But, most critically, a shove would be required to disrupt K-P residents’ decades-old habit.
The K-P government therefore embarked on a complete overhaul of the existing vehicle registration system. In February 2021, the centralisation and digitisation of all records was completed. Work is now underway to introduce an e-payment system that would allow users to view and pay their dues online and by 2022, the K-P government will be introducing universal number plates in the province. But to bring a behavioural shift, the government has announced the new motor registration fee at a notional rate of Re1 for small cars up to 2500cc. This used to be 1 to 2% of the vehicle value, as is still the case in Islamabad. Re-registration of vehicles has been made free, while for larger vehicles, the registration fee has been reduced to 1% of the vehicle value, which previously was 4%, like in Islamabad.
The Re1 car registration reform is an example of an extraordinarily aggressive reform that aims to change citizens’ behaviour. It is made up of a series of specific system enhancements that address concerns found during a thorough diagnostic process. While the outcomes of these reforms are still to be seen, they do offer as a model for other departments and provinces to follow, and they also serve as a reminder that hard reforms alone are less likely to work without softer interventions that address underlying citizen behaviour.