Vehicle importers call for end of taxes on consignment

Car importers are calling on the Internal Revenue Department to reduce the 3.5 percent tax levied on the payments for vehicles imported under a consignment system.

While cars imported using individual permits do not have to pay the tax, those using consignment do have to pay the tax.

The tax has been in place since September 2012, and initially led to questions about which body would be responsible for collecting it. Initially it was collected automatically by the government bodies responsible for foreign currencies, though this was later switched to payments based on self-assessment.

Members of the Myanmar Automobile Manufacturers and Distributors Association have pushed for removal of the tax on consignment imports, as it unfairly benefits importers who do not use a consignment system.

U Htay Aung, from Ran Speed Auto, said most car importing businesses now use the consignment system as it does not require up-front capital to purchase vehicles. Under a consignment system, cars are still owned by the foreign-based exporter, but sold by a local broker who then earns a commission on the sale.

“During the 2013-14 fiscal year, the revenue department did not remove the 3.5pc tax, though other policies have been changing day-by-day, and taxpayers suffer as a result,” said U Htay Aung. He added importers are asking the department to change its policies, as now many importers are being hit by the tax.

Daw Yamon Khin Aung, department head from the Company Circle Tax Office, said the 3.5pc tax is mandated by law.

“Foreign companies choose a company in Myanmar, and assign it as the official dealer and then use it to sell their cars or commodities,” she said. “They are getting money from our country, so we collect a 3.5pc tax on their income.”

Daw Yamon Khin Aung added that it is up to taxpayers to correctly declare how much money they are generating from the sales.

Individual importers of vehicles are not required to pay the tax. Only companies using the consignment system must pay.

U Htay Aung said that 300,000 cars have been imported in recent years since importing has been generally allowed, with about 60,000 coming from the consignment system.

“There is no need for this tax,” he said. “Importers have lost their chance and sales centres are facing tribulations from the system.”

While removing the tax may not be feasible, the rate of 3.5pc could be lowered.

“The current system is a burden on us,” he said.

U Moe Kyaw Swa, vice chair of Myanmar Automobile Manufacturers and Distributors Association, said those importing based on consignment are losing out from competitors who import through their own purchases.

“We can’t compete with them. If they don’t pay the tax, we can’t continue to import the cars,” he said.

U Moe Kyaw Swa said that rather than change the law, he requests that the policy for imports be made fairer.

“The car import industry is already declining. Even I will close my car sales centre at the end of 2015,” he said.

“We do not want other imports thinking they can obtain an advantage by importing without paying the 3.5pc tax.”

Source: Myanmar Times

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