The days of tax-free used cars could soon be over with the Revenue Department floating the idea of imposing tax on both second-hand car dealers and sellers as part of its effort to boost the government’s dwindling coffers.
The department is conducting a study into tax charges for used cars, according to director-general Suthichai Sangkhamanee.
Initially, the department may authorise the Land Transport Department to collect the tax for payment efficiency, as the Lands Department does as a land sales tax collector, he said.
Used-car market transactions stand at around 3 million units a year, but in order to avoid paying taxes, used-car dealers have always claimed that sold cars belong to owners who have asked the dealers to sell them, and these car owners are not subject to any tax, Mr Suthichai said.
The sale of used cars to dealers is always done through an open-ended ownership transfer, a transaction that neither identifies a purchaser nor requires registry at the Land Transport Department, allowing used-car dealers to avoid tax payments.
The Finance Ministry’s tax collection departments are looking at new taxes and ways to boost collections after the Yingluck Shinawatra administration cut corporate and personal income tax as part of it promise in the 2011 general election in a bid to gain the support of the middle-class and business owners.
Companies are now entitled to a 20% corporate income tax payment, compared with 30% previously, while the government has halved the lowest personal income tax bracket to 5% from 10%, lowered the highest rate to 35% from 37%, and extended the numbers of brackets to seven from five.
Moreover, the excise tax refund for first-time car buyers, the government’s main populist policy, also cost around 90 billion baht in forgone tax revenue. Even though the scheme has expired and almost all of cars that qualified for the tax rebate have been delivered, it caused a 45% drop in new car sales for the first two months of this year.
Mr Suthichai said he will discuss the potential tax levy with major used-car dealers.
One big hurdle for the department is that almost all used-car dealers are not registered as companies and often understate sales to evade tax payments.
Toyota Sure, a used-car dealer for the Japanese car maker, appears to be the only one to pay its tax correctly.
If the department levies a 1,000 baht tax for every used-car purchase, it will receive tens of billions of baht a year, said Mr Suthichai.