Grey market pleads for duty cut

Grey market pleads for duty cut

Trade group wants 30% rate for its car imports

An official walks around a showroom during last month's inspection of luxury cars impounded for alleged evasion of tax and illegal imports. The Customs Department is set to provide information to investigators about the first batch of seized vehicles. (Photo by Patipat Janthong)
An official walks around a showroom during last month's inspection of luxury cars impounded for alleged evasion of tax and illegal imports. The Customs Department is set to provide information to investigators about the first batch of seized vehicles. (Photo by Patipat Janthong)

Independent car importers and distributors, known as grey-market operators, are calling on the Finance Ministry to cut the vehicle import tariff from 80% to 30%, a move they say will level the playing field amid fierce competition with authorised dealers.

The duty on car imports is a hurdle for grey-market operators trying to compete with authorised distributors, said Somsak Sriratanaprapas, chairman of the Independent Car Importer and Distributor Association.

The group on Tuesday delivered a letter to the Finance Ministry, asking it to lower the 80% rate that has been in place for 30 years.

Apart from customs duty, all imported vehicles are subject to a 10-50% excise tax based on CO2 emissions, a 10% interior tax and a 7% value-added tax, as are vehicles assembled in Thailand.

"With the four combined taxes, import vehicles cost 116-328% more than declared prices and Thai buyers have to shoulder all these taxes," Mr Somsak said, adding that the grey market merely wants import duties to reflect market circumstances.

A 30% rate would put Thailand on a par with Malaysia and alleviate the problem of false declarations for vehicles, he said.

According to Mr Somsak, Thai governments have imposed high import tariffs as a means to attract foreign carmakers to invest in the country's automotive industry. Thai-made vehicles account for the largest share of the local car market.

Mr Somsak said the grey market has faced a tough situation since 2012, when the Customs Department raised the import tax and tightened customs surveillance of grey-market cars after gripes by authorised dealers that their market share was being stolen by grey-market importers -- many of whom were suspected of illegally understating the value of their imports to minimise tax burden.

Moreover, most authorised distributors, such as those for Mercedes-Benz and BMW, refuse to provide maintenance for cars sold by grey-market operators.

In 2013, the Department of Special Investigation (DSI) began rigorously inspecting disassembled luxury cars. The Industry Ministry also launched tighter controls to test imported cars before delivery to customers.

The issue of grey-market sales was exacerbated after the Customs Department raised cost, insurance and freight (CIF) rates by 10-20% for imported vehicles, effective from October 2015.

Mr Somsak said these factors have dealt a severe blow to the grey market, as seen by the fact that just 3,816 cars were sold last year with an import value of 6.3 billion baht -- down from 12,831 with an import value of 20.8 billion baht in 2012.

The decline in grey-market fortunes came as total import car value rose by 3.6% to 32.8 billion baht in 2016.

Mr Somsak forecasts grey-market car sales to stay flat at 3,000-4,000 units this year. He said the number of grey-market operators has shrunk to about 100 from nearly 600 in the past.

Kulit Sombatsiri, director-general of the Customs Department, said he had yet to see the grey-market operators' letter but noted that it would not be the first time they have requested cuts in the import tariff.

Officials must consider whether the current rate is too high when compared with those of other countries, Mr Kulit said. Furthermore, the Customs Department is revising criteria to make it easier to compute the price of import cars, he said.

An informed Finance Ministry source said that if the import tariff for vehicles were cut as requested by grey-market operators, a corresponding increase in excise tax would be needed to maintain collection levels.

A tariff cut would also address the problem of car importers understating prices to lower tax bills, the source said.

In related news, the Customs Department is expected by tomorrow to provide the DSI with information about the appraised prices of the first 32 of 160 luxury cars seized by DSI investigators.

DSI chief Paisit Wongmuang said Tuesday that when the price information is received, the DSI will proceed with summoning importers of the 32 cars and other involved parties to acknowledge charges of tax avoidance.

After this first group of cars, the DSI will move on to the rest seized during raids on showrooms across Bangkok in May, Mr Paisit said.

He said the DSI has received more information from the British National Vehicle Crime Intelligence Service regarding various supercars found in past raids parked at showrooms owned by Panusak Techaterasiri (aka "Boy Unity").

The intelligence service affirmed its previous finding that 13 luxury cars seized by the DSI were stolen from Britain and smuggled into Thailand. The DSI must now wait for further information as to whether the service will pursue legal action concerning the stolen cars in Thailand or file a lawsuit in Britain and later seek to have suspects in Thailand extradited to face legal action.

Among the seized supercars, at least 73 of them were proved to have been imported as whole cars but falsely declared as dismantled auto parts to avoid paying a higher rate of import tax, Mr Paisit said.

The DSI will order the owners of these cars to formally surrender their cars or have the cars seized, he said.

Several apparently honest car buyers have been allowed to keep their cars until notified by the DSI to surrender them.

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