Car dealers call for review of vehicle import tax policy

Car dealers have decried the high taxes imposed on imported cars, saying the charges are hurting the business, the Sorwatraco Limited, a car dealership, managing director, has said.
Importers want taxes on new cars like these to be reduces. The New Times / Net photos
Importers want taxes on new cars like these to be reduces. The New Times / Net photos

Car dealers have decried the high taxes imposed on imported cars, saying the charges are hurting the business, the Sorwatraco Limited, a car dealership, managing director, has said.

Kayombya said the Rwanda Revenue Authority (RRA) levies huge taxes on imported cars, making them expensive for customers. “It is like the taxes are intentionally imposed to force us out of business,” he said.

Citing fees levied on a small car compared to the market price from point of origin, he said it is ridiculous. Kayombya also claimed in an interview with Business Times that the RRA does not consider invoices car importers submit for tax assessment.

According to RRA customs policy, the custom duty and other taxes on imported cars are levied basing on the cost insurance freight (CIF) value of the cars.

Kayombya, who is also the Rwanda Car Importers Association vice president, however, claimed that sometimes this is not the case, saying importers are at times charged more than 25 per cent value of a small car as taxes.

He explained that taxes on cars with 2.5 cubic centimetres (cc) to 3cc are taxed 10 per cent of the car’s value, while those with 4cc to 4.5cc pay 15 per cent tax. He said this is too high for them.    

The average tariff on vehicles, such as small cars, trucks, motorcycles, as well as non-motor vehicles is 8.6016 per cent, according to the 2011 World Trade Organisation (WTO) report.

If an importer fails to clear a vehicle within 15 days, they pay a 4 per cent storage charge to the customs. Kayombya also said that import duty is calculated differently for new and used cars.

Flexi Singama, the president Rwanda Car Importers Association, however, said though taxes are high, the problem needs to be seen in a wider context “because the customs policies are the same across the region”.

Interestingly, Singama suggested that taxes on new vehicles should be reduced and those of old imported cars increased. This will protect investments by ‘authorised’ car dealers and make it easy for people to buy new cars as well as protect the environment “because old cars emit dangerous gas emissions.”

Last year, a consultative meeting on the age limit of imported used motor vehicles entering the East African Community (EAC) agreed to harmonies the age limit of vehicles imported into the region, noting that they were a significant source of greenhouse gases emissions.

He also calls for a policy to guide the importation of vehicles.

“Everyone can import any car as long as they can afford to the pay taxes. The only requirement is import a left hand drive car.

He said there was an urgent need to control the business.

“We should know who imports what, the minimum facilities required to start the business and authorisation from car makers that the vehicles one is selling are certified to be used in the country’s environment,” Singama noted.

He also called on RRA to reduce taxes on demonstration vehicles, arguing that in Rwandan culture “people believe in testing” before they acquire something.

However, Jean Marie Gakwerere, the RRA acting director for taxpayer services, dismissed the car dealers’ allegations.

“Our tax policy on imported cars is clear… we always determine one’s taxes basing on the car’s market price at the point of origin and also in the domestic market, depending on the percentage of one’s tax invoices.”

He added that the problem was not high taxes, but importers with a habit of undervaluing tax invoices.

“Some importers do not understand the implication of undervaluing invoices. They think that if they undervalue the tax invoice, they would automaticall pay lower taxes. But they are always shocked when we assess the tax according to the actual market price since we track all imports,” Gakwerere said.

In 2010, the government initiated a policy of harmonising the motor vehicle registration processes with the other East African Community countries and the desire to improve service delivery in Rwandan taxation system.

According to the policy, payment of registration fees for vehicles is paid once on importation as well as for the existing registered motor vehicle.

The basis for payment is the engine capacity in cubic centimetre (cc). According to RRA, depending on engine power, ranging from 0 to 4501cc, registration fees vary from Rwf75,000 to Rwf640,000.

“Cars would be affordable if we aren’t made to pay almost 50 per cent tax on most of the vehicles,” dealers who requested not to named, noted.

The importers also said high bank lending rates were compounding their problems.

“As if RRA frustration is not enough, bank rates are making it difficult for us to make profits,” they said. 

 

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