Russia » Economics
Author`s name Michael Simpson

More Disastrous Measures Introduced on Car Market

Will the popularity of second-hand foreign cars drop in Russia?
The problem of import of foreign cars promises to be topical within the nearest 1-1.5 months not only for customs officials and car dealers. Recent events will spoil the spirits of people living in Russia's Far East and make them change the attitude to local and federal authorities. Russia Prime Minister Mikhail Kasyanov signed a decree on leveling customs duties for foreign cars which age is from 3 to 7 years. The document will come into effect in a month, at the end of July.

The subject of customs duties increase was touched upon many times within the past several months. Lobbyist of the Russian car-making industry and those wishing to attract foreign investors to the sphere are making much effort to put obstacles to export of second-hand foreign cars to Russia. Following the introduction of prohibitive measures and the increase of customs duties for cars that are older than 7 years, both sides decided to level payments for car exporters, for companies and natural persons.  According to the new document, there will be six payment categories instead of the traditional two categories.

As is known, now natural people importing foreign cars that are not older than 7 years to Russia have to pay the following customs duties: 0.85 euro/1 cubic centimeter (if engine is less than 2.5 thousand cubic centimeters) or 1.4 euro/1 cubic centimeter (when engine is over 2.5 thousand cubic meters). The following innovations will be introduced as soon as the new document comes into effect: the duty will be 0.85 euro/1 cubic centimeter for engines of not more than 1,000 cubic centimeters, 1 euro/1 cubic centimeter for cars with engines of 1,000-1,5000 cubic centimeters, 1.5 euro – 1,500-1,800 cubic centimeters, 1.75 euro – for engines of 1,800-2,300 cubic centimeters, 2 euro for cars with engines of 2,300-3,000 and 2.25 euro/1 cubic centimeter for cars with engines of over 3,000 cubic centimeters.  

Governmental experts are lying when they say that the raise of the customs duties levels spending of all exporters of second-hand cars. The problem is that duties for companies and individual car exporters in the Far East have been always practically equal. The situation is quite different at Russia's western border through which more expensive German cars are imported into the country. Now when the new customs duties are introduced Far Eastern consumers will suffer most of all. Spending will go 50% up, not 10-30% as Moscow experts explain.

For the time being, companies exporting second-hand foreign cars pay the duty at the rate of 25% of the declared customs value (it is not less than 1-2.35 euro/1 cubic centimeter depending upon the engine volume), the excise (13 rubles per one horse-power for the engine power of 90-150 horse-powers and 129 rubles for bigger engine powers) and the value added tax (20%). If the order doesn't change (nothing has been said about the intention to change it yet), car exporters will set up their own companies to do the business on more profitable terms. According to the governmental decree, a single rate was introduced for registration of cars by natural persons.

The situation is rather cynical indeed. When prohibitive duties for second-hand foreign cars that were older than 7 years were introduced 10 months ago, the following barrier was fixed: 2 euro/1 cubic centimeter with engines of less than 2,500 cubic centimeters and 3 euro for bigger engines. As it turns out now, the government of Mikhail Kasyanov that is now on the verge of resignation, decided to play a dirty trick upon the people. Now the restrictive measures that had been allegedly introduced to protect the country from import of ecologically unfavorable and old cars are made null and void by the new decree.

According to the new document, import of cars that are 8-10 years old becomes rather profitable, as customs duties for such cars are practically the same as those for second-hand foreign cars that are not older than 7 years. Did it make sense at all to introduce the restrictive measures 10 months ago? Now it seems that the federal government is taking every measure to wring money out of ordinary people. Things of this kind occur not for the first time in Russia. It is interesting that the decree was issued in the third quarter of the year, just exactly in the period when governmental plans concerning customs and revenue dues have frustrated.

A car is not just transport in the Far East; it is an instrument of politics in many respects. Russia President Vladimir Putin is to visit the region in August. It will be a convenient opportunity to ask him about the fate of the preferences he promised a year ago for people living in the Far East. There are no preferences at all when the government introduces new duties on cars every season.

The Coordinating Council of the Nakhodka public organizations urged to organize mass protest actions against introduction of the federal law "On obligatory insurance of civil liability of car owners" and against the governmental decree on increase of customs duties for imported second-hand cars.

A session presided by Nakhodka Duma deputy Anatoly Chernovol was dedicated to the problem. Deputies made a decision to appeal to Russia President Vladimir Putin, Prime Minister Mikhail Kasyanov and Russia's Duma chairman Gennady Seleznev with letters. They think that introduction of these anti-popular measures may change the attitude of Far Eastern citizens to the government for the worse. It is quite natural that introduction of new measures and duties will deliver a strong blow against economy, infrastructure and free market of the Far East; the situation may even entail a serious crisis.

Vitaly Tuzyuk
Vladivostok

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