Price of higher-end vehicles fall after tax reduction

Some high-end cars are looking a little cheaper following a reduction in taxes on special goods under the new 2018 Union Tax Law, which was signed into legislation on March 20.

Under the new law, the Special Goods Tax has been halved to 10 percent from 20pc last year. Falling under that category are cars with 1,501 cubic centimeters (cc) to 2,000 cc engines. These include vans, salons, sedans, wagons and coupes, which are popular cars for daily use among Myanmar citizens.

“Vehicles priced above K50 million will be slightly cheaper under the new tax law,” said Ko Hutu Htake, managing director of Distinct Trading Co Ltd.

He added that the taxes will be deducted from Cost, Insurance and Freight (CIF) costs on imported vehicles. The move is expected to benefit car importers following a new car importing policy announced earlier this year which encourages the import of higher-end car models.

Depending on the car model, importers can save between K1.7 million and K7 million on CIF costs as a result of the reduction in Special Goods Tax, Ko Hutu Htake said.

Ko Min Min Maung, managing director of Wun Yan Kha, a car sales centre, said the reduction in taxes comes in response to requests from businessmen after the government began taxing vehicles with 1,501 cc-2,000 cc engines last year. Before last year, vehicles with engines up to 1,800 cc were exempted from tax.

“Businesses have been asking the government to lower the taxes for 1,501 cc-2,000 cc cars and for car prices to decrease. But the 10pc reduction is only on CIF, not the price of the whole car. So the actual decrease is less,” he said.

Better car trade

Traders hope that lower CIF costs will fuel more demand in the local car market. “The car market has been quiet recently as buyers wait for the tax and import policy announcements. Now that the taxes have been announced, we are hoping to see more activity in the car market,” said U Soe Tun, chair of Myanma Automobile Manufacturers and Distributors Association.

Still, there could be more taxes on the way. Just last week, Yangon Minister for Planning and Finance U Myint Thaung submitted a draft of the region’s new tax law during a Yangon Parliament session. Among the proposals is one calling for an update in wheel tax rates in Yangon Region.

“We need to update and fix the wheel tax rate. According to the Road Transport Administration Department, there were over half a million vehicles registered in Yangon Region in 2017-18. But the government has only collected K2 billion in wheel tax. We will receive more tax revenues if we update the rates for the wheel tax,” said U Myint Thaung.

He added that discussions to update the various tax rates are underway. One of the changes includes collecting taxes based on the ratio of vehicle weight to engine power.

At the national level, the government is aiming to gradually remove old right-hand-drive cars from the roads as these vehicles do not align with Myanmar’s road rules. In that light, some traders have said that the government should instead reduce taxes for car importing to facilitate that goal.

Source : Myanmar Times

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