Tariff anomalies discriminate against reconditioned Japanese cars
Saturday, 18 February 2012
It is impossible to dispute the fact that automobiles, both new and old have become significantly dearer to purchase. The rising exchange rate of the BDT against the US dollar and an ever-increasing tax regime has put on a dampening effect on the import of passenger vehicles to Bangladesh. For the better part of the last one and a half decades, imported reconditioned Japanese vehicles have formed the backbone of the Bangladesh car market for a number of reasons. The absence of any mass transit system in the capital city to cater for the ever-increasing population coupled with easy car loans offered by financial institutions and the burgeoning middle class having more disposable income, all colluded together to create a significant second-hand market for vehicles. This market has by and large been controlled by vehicles of Japanese make with a worldwide reputation for quality and reliability.
However, what has emerged from investigative journalism is that some cars are 'more equal than others', which is to say that there exists a disturbing trend in the manner vehicles are being valued by the customs authorities. The list of 'anomalies' ranging from regulatory inconsistencies and disregard for the need for framing of a set of appropriation regulations with field-level inputs has, in effect, caused a significant slump in import of cars and other vehicles from Japan in particular. The assessment system of customs has rightly been questioned. It is alleged that customs authorities do not assess the values of reconditioned or old and used automobiles as per prices mentioned in invoices. Rather, these imported vehicles are assessed on the basis of prices mentioned in Japanese Yellow Books, applying the prices mentioned for new cars and not the old.
Should this indeed be the case, then we have a serious problem at hand, for it negates the fact that depreciation is taken into account. There is little sense in having the same fixed rate of depreciation for vehicles coming off the assembly line in new condition and automobiles that are three to five years old. It becomes increasingly difficult to defend the current tax regime, especially in the light of the fact that the government has introduced no less than five separate statutory regulatory orders (SROs) between 2008 - 2011 to deal with depreciation values on prices of automobiles. This constant revision and / or introduction of rules and regulations have in effect severely and adversely affected the automobile trading system.
Needless to say, such ad-hoc measures fail to inspire confidence in the import business. It also fails to inspire confidence amongst customers who have, over the last few years witnessed a phenomenal rise in prices of Japanese vehicles. Given that foreign exchange has become a much more precious commodity in the economy and banks have now drastically cut back car loan facilities (down to about 30 per cent of value of a vehicle), it is hardly surprising to see a massive cutback on import of vehicles to the country in the current fiscal. However, what is obvious is that some measure of stability is required in working out a regime whereby age-limits of vehicles are taken into account for taxation. Again, there is room for rethinking on the fixed exchange rate assessment procedures currently followed by customs authorities. Unless constructive steps are taken to address these very serious issues, the retail prices of used and reconditioned vehicles on the roads of Bangladesh will continue to remain volatile, hurting both business and customers alike.
However, what has emerged from investigative journalism is that some cars are 'more equal than others', which is to say that there exists a disturbing trend in the manner vehicles are being valued by the customs authorities. The list of 'anomalies' ranging from regulatory inconsistencies and disregard for the need for framing of a set of appropriation regulations with field-level inputs has, in effect, caused a significant slump in import of cars and other vehicles from Japan in particular. The assessment system of customs has rightly been questioned. It is alleged that customs authorities do not assess the values of reconditioned or old and used automobiles as per prices mentioned in invoices. Rather, these imported vehicles are assessed on the basis of prices mentioned in Japanese Yellow Books, applying the prices mentioned for new cars and not the old.
Should this indeed be the case, then we have a serious problem at hand, for it negates the fact that depreciation is taken into account. There is little sense in having the same fixed rate of depreciation for vehicles coming off the assembly line in new condition and automobiles that are three to five years old. It becomes increasingly difficult to defend the current tax regime, especially in the light of the fact that the government has introduced no less than five separate statutory regulatory orders (SROs) between 2008 - 2011 to deal with depreciation values on prices of automobiles. This constant revision and / or introduction of rules and regulations have in effect severely and adversely affected the automobile trading system.
Needless to say, such ad-hoc measures fail to inspire confidence in the import business. It also fails to inspire confidence amongst customers who have, over the last few years witnessed a phenomenal rise in prices of Japanese vehicles. Given that foreign exchange has become a much more precious commodity in the economy and banks have now drastically cut back car loan facilities (down to about 30 per cent of value of a vehicle), it is hardly surprising to see a massive cutback on import of vehicles to the country in the current fiscal. However, what is obvious is that some measure of stability is required in working out a regime whereby age-limits of vehicles are taken into account for taxation. Again, there is room for rethinking on the fixed exchange rate assessment procedures currently followed by customs authorities. Unless constructive steps are taken to address these very serious issues, the retail prices of used and reconditioned vehicles on the roads of Bangladesh will continue to remain volatile, hurting both business and customers alike.