Car importers protest URA’s latest tax plan

Business

Wednesday, 12 May 2010 21:05

Written by Moses Mugalu

9 Comments

Car imports are set to be more expensive after Uganda Revenue Authority moved to scrap an evaluation system that favoured importers with a strong bargaining power.

In the meantime, URA has drawn up a price list for imported cars that all importers should abide with, a radical move that goes against the tenets of a free market economy. URA has been depending on valuations from importers.

The car evaluation system that URA is planning to abolish is called ‘Method One.’ Under this system, URA has been assessing taxes charged on used motor vehicles based on information provided by importers, which include emails between buyer and seller, and invoices.

URA’s plans have thrown the once calm car importation industry into disarray. Dealers who had already ordered and paid for cars before URA swung in action are facing a difficult situation. Importers warn that the price of a car is set to shoot up.

“We’re disappointed with URA which has decreed that henceforth with one of the most internationally accepted taxation methods which serves to be fair to both URA and the business community should cease to be applied,” said Steve Manyire of Equation Business Solutions, a consultancy and advisory firm dealing in online car shopping.

Manyire argues that URA is simply being heavy-handed and unrealistic.
“If there’s a snake in the house you don’t set the house ablaze. You look for the snake and kill it. URA should just arrest those who have abused the system and penalize them,” he charged.

Paul Kyeyune, URA spokesman, said the method had been abused, forcing the tax body to do away with it. Starting this June, taxes on imported vehicles will be determined on URA’s fixed prices as quoted by manufacturers.

“We have carried out an extensive investigation and found out that most of them have been forging email exchanges and invoices,” Kyeyune told The Observer last week.

However, Kyeyune declined to give details of URA’s investigation, or the magnitude of the loss the body has incurred due to falsification of the documents.

URA’s new price list is based on information gathered from importers, websites, reference books, just to mention a few. Some of the taxes that importers pay to URA include import duty (25 %), VAT, environmental levy, withholding tax (6%), registration, just to mention a few.

That’s not all that the car importers are complaining about. Many say that URA’s fixed dollar rate also makes it costly to pay their taxes. URA’s dollar rate for May has been fixed at Shs 2085, lower than the market rate of Shs 2140.

Nevertheless, importers say that since they are purchasing goods in bulk, URA’s dollar rate should be “significantly lower” than the market rate.

Now, the new price list from URA changes the entire business model of importing cars. Simply put, this means that if an importer brought in a BMW model 2004, URA will value that car according to its internationally quoted price.

URA will not consider the fact that perhaps the seller decided to dispose of the car at a lower price due to constraints he or she is facing.

Lately, many Ugandans have taken on buying used motor vehicles sold online, with a bulk of them being imported from Dubai, Japan, UK and South Africa.

The only statistics available show that used motor importers paid up to Shs 2.65 trillion in taxes to URA between 2003 and 2006.

But that contribution to the national coffers is expected to be declining. For instance, between January and June 2009, URA cleared only 3,500 used motor vehicles, less than half the annual total of 15,787 imported into the country in 2008.

URA is facing a tight race against a time to beat its annual revenue target before the next financial year starts next month.

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