According to the bill of amendments to Tax Code, excise tax increased on automobile imports starting January 1, 2017. The decision is part of government plan for strengthening national currency exchange rate and mobilizing additional financial resources to state budget.
Starting January 1, 2017, imports of automobiles manufactured after 2003 will become more expensive. As to hybrid automobiles, excise tax has halved by 60% in this segment. Tax Code amendments turned out especially painful for importers of right-steering automobiles: starting January 1, 2017 excise tax on similar vehicles will triple.
The Caucasus Business Week (CBW) has explored how this decision affect and will affect economic developments in the country.
Association of Automobile Importers
Reformation process was to start long ago in automobile imports field, Misha Alkhanishvili, head of Association of Automobile Importers noted. Consequently, we should consider this government regulation to be the first step in this direction. Many other steps should be also taken and many other regulations should be also introduced, including technical inspection details, he added.
«Otherwise, we will receive very heavy situation. Vehicle fleet is outdated. Number of road accidents has increased. There is very heavy situation in terms of emissions», Alkhanishvili noted.
This regulation will mainly concern importers of right-steering and used vehicles. Their sales are expected to drop. Despite this fact, no considerable losses are expected and they will manage to get adapted to existing environment, Alkhanishvili said.
«Trade in used cars is a temporary event. Similar companies are created, when the field is not regulated by legislation. This is an ordinary case. Any advanced country considers used vehicles as undesirable products. All countries block them and get rid of them. And this undesirable product was imported to Georgia from around the whole world», Alkhanishvili said.
Various countries regulate this problem through various mechanisms, including through growth in tax rates and other barriers. Sooner or later Georgia will also have to bring order into this field and this regulation is an ordinary case, he added.
Ratio of new vehicles in total automobile imports is very small and makes up about 5%, Alkhanishvili pointed out and added that automobiles imports and sales will decline, because secondary market was saturated by used vehicles.
Many other reforms should be implemented in the automobile field and many other regulations should be also introduced, including ecological norms, security issues and technical inspection issues, he said.
Caucasus Auto Import
Giorgi Surguladze, director for Caucasus Auto Import, explains that this government initiative will bring useful results for the company. Uncertainty period will arise among customers for a short period, but everything will be settled soon. This decision will restrict imports of old vehicles and this is a genuinely good decision, Surguladze said.
This regulation will hit importers of right-steering vehicles, he said.
In response to the question, whether this decision will affect the company sales, Surguladze noted that sales traditionally drop in the month of January and the current year contraction is identical to the previous year’s indicators, he added.
David Rekhviashvili, director of MyCar.ge company, welcomes this decision if no other frustrating factors arise. If solvency of our citizens grow, this government decision cannot damage the business genuinely, David Rekhviashvili noted.
Current tendencies do not contain contraction signs,he said.
«Orders from Japan have ceased. The segment of vehicles of about 2500 USD with customs clearance is expected to disappear. Despite these expectations, the company will be adjusted to new reality. This regulation was genuinely acceptable», Rekhviashvili noted.
East Gate Group
This government regulation will change sales statistics, Irakli Iashvili, head of supervisory board of East Gate Group company said. Despite the decision will reduce sales, it is an acceptable decision and the company will not protest against these regulations. This decision was to be taken sooner or later, Irakli Iashvili noted.
«Vehicles imported from Japan held serious ratio in total vehicle imports of our company. Nevertheless, we welcome this decision and we do not protest against it. An automobile is a type of cargo for our company that is loaded on container. Places will be freed on ships, because imports will be reduced. I believe the Government was to take this decision earlier», Iashvili said.
The Caucasus Business Week also tried to contact importers of Japanese right-steering vehicles. A part of them abstained from making comments, while we could not contact another part of importers for comments.