barvida - Dhaka Mirror

BARVIDA wants end to ‘discriminatory’ valuation method

Admin — Fri, 05 Apr 2013 08:24:45 +0000

The Bangladesh Reconditioned Vehicle Importers and Dealers Association on Thursday demanded an end to ‘discriminatory’ valuation method in calculating customs duty on import of reconditioned vehicles and sought introduction of a rational method to save the sector.
The BARVIDA also demanded that the National Board of Revenue reduce supplementary duty to 30-250 per cent from 45-500 per cent on the import of different types of reconditioned cars.
The association also sought rearrangement of the slabs of the engine capacity being measured in cc, or cubic centimetres, for imposing supplementary duty for import of used cars.
At a pre-budget discussion with the NBR, the BARVIDA proposed that the NBR accept used cars’ year-wise base value specified in the Yellow Book published from Japan for imposing customs duty on import of reconditioned vehicles.
They said that if the revenue board could not accept year-wise base value, it could set assessable value by giving 10 per cent depreciation for every year with a 25-per cent trade discount from the new price specified in the book.
The Yellow Book is published every month containing the latest depreciated prices of used cars and their prices in the manufacturing year, also called ‘new price’, they said.
BARVIDA leaders said Bangladeshi importers faced problems as the customs authorities accepted only the new price with a 35-per cent consolidated depreciation for 5 years old car in calculating duty on used cars.
‘The importers of used cars have to pay more duty than the importers of new cars pay for same model new car because of such valuation system which is totally discriminatory and unacceptable,’ said Habib Ullah Dawn, president of the association.
He said that import of reconditioned cars and revenue collection from the sector saw sharp fall because of such discrimination.
‘In the first nine months (July-March) of the current fiscal year, we imported only 6,500 cars and paid Tk 800 crore as revenue to the government. But in 2009-2010, we imported 32,225 cars and paid Tk 3,076 crore to the NBR in revenue,’ he said.
Over the last few years, the BARVIDA had been demanding the NBR to change the valuation method but the demand has so far remained unmet, he said.
The BARVIDA alleged that low quality brand new cars from India, China, Korea and other countries flooded the market through price manipulation using the discriminatory valuation method.
Consumers are being deceived buying substandard new cars while the government is losing revenue from reconditioned car imports, they said.
Imported used cars have 90 per cent market share in the country and more than 90 per cent of such cars are imported from Japan.
The association proposed a four-tier cc slab for imposing supplementary duty in place of the existing six-tier slab in import of reconditioned car.
NBR chairman Ghulam Hussain said that the NBR would consider the proposals particularly proposals related to valuation method and rearrangement of cc slab.
NBR member Farid Uddin and former BARVIDA president Abdul Haque spoke, among others, at the meeting.

-With New Age input

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High duty takes toll on importers of used cars

Admin — Wed, 05 Sep 2012 15:56:29 +0000

Importers of used cars are going through tough times due to a high import duty and a cut in car loans by banks, businesspeople said.
Imports of used cars fell by more than 46 percent to 6,700 units during the January-June period this year, compared to the same period last year, customs data showed.
Local car sellers imported 12,500 units during January-June last year.
“A high import duty and declining car finance by banks affected imports,” said Habib Ullah Dawn, a former president of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA).
Banks earlier financed up to 70 percent of the value of a car. Now the maximum limit for financing is 30 percent, he said.
In the current budget, the government imposed a 45 percent supplementary duty on the import of a car with an engine capacity of 1.5 litre.
As a result, the total tax burden would be 129 percent on these vehicles, he said.
People’s purchasing capacity has been on the decline in the recent times mainly due to a lack of liquidity in the banking channel, Dawn said.
Imports of used cars more than halved to 9,600 units in fiscal 2011-12 from 19,823 units in the previous year, according to BARVIDA statistics.
Dawn said the government increased import duty in each of the last three budgets.
Moreover, the importers are in trouble as the Japanese currency became stronger against the dollar, he said, adding, “We are losing $3,000 more on each 4-litre car.”
More than 80 percent of Bangladesh’s imported cars are reconditioned or used, mainly sourced from Japan and used by middle-income people.
Dawn said the government imposed a total of 830 percent duty on import of a four-litre car, which is the highest in the world.
India manufactures cars and yet has never imposed import duty more than 500 percent on used cars, he said.
Dawn, owner of Auto Museum, said the government’s revenue from the sector has declined.
Compared to the previous year, revenue declined by 50 percent to Tk 1,100 crore last fiscal year, he added.
The local market of used cars witnessed a boom in 2009, when more than 38,000 units were imported, thanks to a surge in bank finance and a buying spree by the emerging upper middle class.
Bahalul Haque, owner of Modern Auto, said, “People ask about car prices, but do not buy.” It is difficult to continue business, said Haque.
He demanded the government rationalise the import duty structure of old and new cars to ensure fair prices.
A balance between the import duties on reconditioned and new cars will remove the discriminatory prices in the local market, while the government will be able to realise a significant amount of additional revenue, he said.

Courtesy of The Daily Star

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821pc duty sends reconditioned car market crashing

Admin — Sun, 04 Dec 2011 17:51:55 +0000

Sales slump by 30pc
A crippling 821 percent duty – highest in the world – imposed by the government on reconditioned vehicles has reduced sale by 30 per cent in recent months.
The reconditioned cars business is in the doldrums because of staggering import duties. Taxes have also hit the sale of brand new cars.
Sector insiders said many reconditioned car traders have already diversified their business while others are about to shut down their business to save their dwindling investments.
“We used to sell a reconditioned Toyota Corolla for Tk 0.9 million in 2008 but its price has now shot up to Tk 2.1 million,“ said M Habibullah Don, former president of Bangladesh Reconditioned Vehicle Importer and Dealers Association (BARVIDA).
Pulling the market down are duty-hike on car imports, high cost of fitness renewals and the rising rate of Japanese yen against US dollar.
Today the middle class can’t afford Japanese reconditioned cars, although they made up the biggest chunk of the buyers during 2008-2010, the boom period in car trade.
The sales of cars have shrunk by a quarter in the last few months badly hitting government revenue.
“The government has increased duty on reconditioned cars by up to 821 per cent which is unprecedented in the world,” moaned Habibullah.
The duty hike on old imported cars hasn’t helped increase government revenue. It has only created an opportunity for new car importers to under invoice the quotations.
The former BARVIDA chief has sought government protection for a sector that directly or indirectly employs 100,000.
“Earlier, revenue authorities collected Tk 30 billion as duty from reconditioned car import but I think this year the board will not able to get more than Tk 15 billion from the sector,” he said.
Import of reconditioned cars witnessed the biggest boom in the country’s history in 2008 and 2009, boosted by a surge in bank finance and a buying spree by the emerging middle class.
In fiscal 2008-09, car imports hit a record 31,097. During fiscal 2007-2008, some 23,000 cars were sold in the country. Of these, around 86 percent were in the capital, according to the data of BARVIDA.
Local car importers now can import up to three-year old cars, a traders said adding it would encourage import of new but low quality cars, particularly from the neighbouring country.
Earlier, they were allowed to import cars up to five-year old.

-With Daily Sun input

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Port city loses glory in car business

Admin — Thu, 06 Oct 2011 15:54:21 +0000

Sales of reconditioned vehicles have fallen in the port city in recent years due to a price hike. The trend is also likely to continue as the government, in this year’s financial budget, has only allowed the import of vehicles up to three years old and the prices of cars in the Japanese market have also gone up, says Sujauddin Mamun, proprietor of Maxim Car Centre.
He said car dealers are frustrated over the changes imposed in the budget for fiscal 2011-12. The import of five year old reconditioned vehicles is no longer allowed and as a result, prices will further go up on account of quality, he added.
“We will have to pay almost thirty percent more, but the government will only get a small portion,” he said, adding that it means the country will lose large sums of foreign currency.
Moreover, it will encourage importers to import sub-standard vehicles to offer competitive prices to clients, ultimately deceiving the clients, Mamun said.
Maxim Car Centre started business in the port city in 1985, at a time where there were no supplementary duties on vehicles with over eight seats, he said.
“But now, we have to pay 30 percent supplementary duty on vehicles with over eight-seats, like Noah, Voxy and so on,” Mamun said.
As a result, the prices of these vehicles have increased by more than two times, going beyond the purchasing ability of most clients.
Habibullah Don, ex-president of BARVIDA, also criticised the government’s decision to allow imports of three-year old vehicles or younger.
He said imports will decrease and the government will be deprived of taxes.
Now-a-days, a private vehicle is not an item of luxury; it is more of a necessity, said Mostafizur Rahman, proprietor of Car Choice that began operations in the port city in 1988.
He said when they first began business, Chittagong was a hub for cars; buyers from all over the country used to gather in the port city to choose their cars in the port shed.
Rahman said their company used to sell 50 automobiles on average a month at that time. Now, their sales have dropped to a dozen a month.
A major reason behind the drop in sales is the perilous journey to Chittagong from other parts of the country. “Now it takes a person 10 to 12 hours to commute to Chittagong from Dhaka, which is one of the main reasons why buyers avoid coming to Chittagong.”
Secondly, the increasing prices of reconditioned automobiles discourage buyers, he said.
“We now have to pay a 365 percent duty altogether on a reconditioned vehicle,” Rahman said.
“We used to offer a reconditioned Toyota Corolla in 2009 for Tk 9 lakh. The price for the same is Tk 20 lakh now.”
AKM Tauhidul Islam, director of Toyota Collection that started business in 1996 in Chittagong, said, “In the beginning, we used to sell 30 cars on average, which has now dropped to 10.”
A Tk 4.5 lakh 6-year old Japanese reconditioned Toyota car in 1996 now costs Tk 19.5 lakh due to the high tariffs, he added.
According to the international rules, if a car is five years old, 69 percent depreciation is deducted from its original price, Islam said. “In Bangladesh, depreciation is only 35 percent.”
He said importers are also losing interest in importing vehicles through Chittagong Port as port facilities are reducing day-by-day.
In Mongla Port, rent to place a car in the port shade is Tk 100 a day, which is Tk 495 in Chittagong Port, he said. “Importers outside Chittagong now prefer Mongla Port instead of Chittagong Port.”
Amar Dutta, an accountant at Kiea Car Centre that began business in 2008, said clients used to buy cars before declaration on the national budget. “The scene is totally different now.”
From selling 10 cars on average a month previously, they not sell 3. He blames the high duties for the fall in sales.
Kazi Shahidullah Babar, director of Zam Zam Car and Automobile Ltd, said Chittagong has lost its glory as the hub for car trade because of some wrong steps taken by the government.
Port facilities are being cut drastically and the dilapidated condition of the Dhaka-Chittagong highway deters customers from coming to Chittagong to buy cars.
Some traditional car traders in Chittagong have shifted their businesses to Dhaka as they found it to be more convenient, said Babar.
Diminishing car loan facilities by commercial banks is another reason behind the fall in sales, he said. ”Banks now provide 50 percent in loans, which was up to 80 percent before.”
Mohammed Sayem, proprietor of Showdagar trading, said it is primarily government policy that suffocates the car business.
In 2002, when the government stopped giving permission to import reconditioned cars, the business struggled to exist and clients got frustrated, he said. The business later got back life after the government took back its decision.
“We are paying taxes and all sorts of duties, but the government is neglecting us,” Sayem said.
He said port facilities should be increased. “We don’t have any legal pass to enter the port, but as an importer I have the right to be there.”
The Chittagong Port Authority (CPA) restricted entry into the port shed as a measure to combat theft. “But as buyers are not allowed to enter the shed, they are discouraged from coming to Chittagong to buy cars.”
Commodore M Anwarul Islam, chairman of CPA, said they took the decision to restrict entry after complaints of theft of different vehicle parts from the port-shed. “After imposing the decision, stealing of vehicle parts from the port-shed has stopped.”
“The port-shed is not a show-room.”

-With The Daily Star input

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