Tyred out: importers say tax policy favours used cars

Almost all of the cars imported to Myanmar last year were second-hand, due to a high tax on brand-new vehicles. The government should reconsider its policy relating to the import of new cars, say businesspeople.

“As far as I know, most Myanmar citizens import used cars. According to the records from last year, brand new cars accounted for only 3 percent of imports,” said U Aye Htun, managing director of Aung Thein Than Company.

Used cars are cheaper and easy to buy, so Myanmar citizens usually opt for this option, he said. Furthermore, the market for used cars is well developed.

“When a person wants to buy a car, they always think to buy a used car first. This is directly related to government policy. We want to import more brand-new cars, but according to government policy, low models are cheap and high models are expensive,” said U Aye Tun. “If the government wants to favour new models, they should change their policy a little.”

Depending on the situation of the country, the market is changing, and the government should set a long-term plan, said U Min Min Maung, from Wun Yan Kha car sales centre. “The tax is very high. We want the government to reduce it,” he said.

Used and new vehicles imported into the country are subject to customs taxes. For most used imports with a 1300-cubic-centimetre engine, the tax is levied against a value of $5000 for the car. For used vehicles with a large engine, the value of the vehicle for tax purposes is higher.

Similarly, for new cars, import taxes are levied as percentage on the vehicle’s value. However, for most used car imports, the value of the vehicle for tax purposes is not a set amount, but instead from a list of Cost, Insurance, Freight (CIF) kept by the government. For instance, a 2014 Toyota Camry had a CIF value of $30,000, according to a list kept by myanmarcarsdb.com.

While tax rates are the same for new and used vehicles, the large difference between CIF values for used and new cars make for vastly different tax payments. Taxes range between 65 and 100pc based on the size of the car’s engine, which take a much bigger bite from a higher-value, new vehicle.

Dealers say they would like to see more done to encourage the purchase of new cars.

Sometimes used cars are in such a bad condition that the cost of fixing them is higher than the cost of buying a new car. Because of this, car dealers suggest that the government should place quality controls on used car imports.

“We hope to encourage foreign investment through brand new car imports, so that foreign businessmen can have confidence in our growing market. In Myanmar, very few car sales centres get as much business as they hope,” said U Aye Tun.

For the districts and regions outside of Yangon, 1300cc and 1500cc engines are not powerful enough. People want to import more powerful engines, but they can’t afford new cars.

The current system, which has been in place since 2011, states one avenue for receiving permission to buy a new car means trading in an old vehicle. The trade-in receives a “slip” from the Road Transport Administration Department. This is valued at around K10 million.

The slip system is the current favourite method of obtaining permission to import, though every Myanmar citizen also has the right to import one vehicle during their lifetime.

These policies stem from the time under the military government when ordinary citizens were effectively prohibited from importing a car. Prices were very high: In the 2000s, a used Toyota van that would cost about K100 million in Myanmar could be bought on the Thai border for just K4 million. Based on these figures, Myanmar was the world’s most expensive country to buy a car.

“We need a slip to buy a new car, and the price of a slip is very expensive. I think there is something wrong with this system. We hope it will be phased out within the next two years,” said Ko Ayay Kyo from Mandalay.

“It is up to the government to implement the policy. The kind of cars that we import is totally dependent on this,” said U Min Min Maung.

Source: Myanmar Times

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