NOTICE: Car Dealers Cry Foul Over New Tax Measures

BY PATRICK JARAMOGI

KAMPALA, Uganda[SHIFTMEDIA]  Motors vehicle car importers in Uganda are crying foul regarding the new move by Uganda Revenue Authority (URA) to have all imported cars older than 9 years from date of manufacture to pay taxes at the port of entry.

The car importers under their Associated Motor Dealers body reveal that the move by the tax collectors will not only render many Ugandans jobless, but will also affect revenue collection.

URA Notice

On Friday April 1 2022, the Uganda Revenue Authority   issued a notice notifying the general public that effective 1^st July 2022, motor vehicles of nine (9) years old or more from the date of manufacture shall no longer be cleared under the warehousing regime.

URA noted that the clearance of such vehicles shall be facilitated under the Single Customs Treaty (SCT) arrangement, where taxes will be paid upon arrival at the point of entry into the East African Community 

Car importers cry foul

Almalik Azhar the former chairman Associated Car Dealers in Uganda noted that the new arrangement is set to backfire. “In Uganda brand new cars account for just 5%, while the commercial ones (trucks) account for 25%, the remaining bulk of 75% is old cars manufactured between 2001 and 2010,” said Malik in an interview.

Malik who sounded irked said to make matters worse URA didn’t consult them as stakeholders before putting out the notice.

He said further; “As a former National chairman of car dealers, I need to put it clear that this industry employs over 45,000 people both directly and indirectly. Such arrangements will see most of these people employed in car bonds rendered jobless.”

Malik also noted that the country is set to lose out on revenue since most business will now shift to either Mombasa (Kenya) or Dar es Salaam (Tanzania).

“Since URA no longer wants cars cleared from the bonds, we can as well shift and use warehouses in Kenya and pay as and when we wish to clear cars, “ he said.

He said that the car importation industry is the 10^th leading tax payer in Uganda.

He said that in the FY2018/19, a total of 43, 079 units of vehicles were imported worth UGX 1.3 trillion leading to tax gains to the country of UGX568 billion.

While in the year 2019/20, a total of UGX 506 billion was raised as revenue, and an increase of UGX 659 billion was realized in the year 2020/21.

As of February 2022, a total of UGX 429 billion had been raised as taxes from car imports in the country.

“I am aware that taxes are needed to develop our country, but the rush for taxes isn’t good and can easily backfire, we need to have been consulted first,” he said.

 Associated Car Dealers Boss speaks out

Zeeshan Arshad the General Secretary Associated Car Dealers described the move by URA as disastrous. “As stakeholders we needed to have been consulted and sit in a round table before any decisions are made,” said Zeeshan.

He noted that URA had played a Ping-Pong game regarding meeting them. “The last time URA communicated, they postponed the meeting, when they pushed it further, we were shocked to see a notice from them,” he said.

Zeeshan said the new move will create an increase on costs of vehicles since issues of liquidity will create scarcity in the market.

“There will also be loss of business especially in re-export since most of the imported units are meant for foreign export,” he said.

He demanded that an urgent meeting be held with the Commissioner General URA to resolve the impulse.

 

URA speaks out

In our chat with John Musinguzi Rujoki  the Commissioner General Uganda Revenue Authority, Rujoki noted that all parties were engaged before the notice was made. He noted that the move is geared towards boosting and enhancing revenue collection that is much needed for steering economic development.

The Commissioner for Customs Abel Kagumire said all stakeholders in the industry were duly engaged for a chat before the notice was released. “Those complaining that they were not invited for the meeting are the ones who absconded. We had a meeting with the association leadership for the whole day at Sendaula House. I even have pictures to prove my point,” said Kagumire.

He said the purpose of the new move was to increase more revenue and to also reduce on old cars with environmental issues on the roads. “For your information most of our East African partners states are already doing the same. Cars older than nine (9) years attracts environmental levy, we are doing this in consideration of our environment too,” he explained.

Commissioner Kagumire noted that when cars spend 270 days (nine months) in the car bonds government doesn’t get instant revenue. “With this new measure, we shall get our revenues immediately the car enters the port of entry,” he said.

Perhaps a saving tip for importers

After the Covid-19 lockdown, scores of car dealers petitioned government crying foul regarding the over accumulated car storage costs (demurrage) at ports and local custom bonded warehouses.

Car storage fees in custom bonded warehouses range from an average of sh5,000 and Sh20,000 per day depending on the size and negotiations. That means if the car is not purchased within the 279 days, the importer has to fork out UGX1, 350,0000 per car parked in the bonded warehouse.

Vehicles are given a lifetime of only 270 days in a custom bonded warehouse to have paid the due import duties, registered and exited the bond or else they are advertised for public auction to recover the import duties and the balance if any is given to the importer.

With the new move perhaps such demurrage will be contained.