Radar | Jul 31,2021
Car imports are languishing at Djibouti's ports as suppliers scramble to cover the import duty following a recent regulation that removes the 30pc tax deduction on second-hand cars.
Importers that had vehicles pending importation before May 15, 2019, continued to be taxed based on the earlier tax regulation. But suppliers that were unable to import the cars before the specified window will be taxed according to the new regulation.
This has led to a disagreement between the Ministry and suppliers that had been in the process of importing before the date the tax became effective.
Importers complained that the regulation came as a surprise without adequate consultation made with all the relevant stakeholders and without enough time given to importers to make the necessary preparations ahead of time.
A used car importer that preferred to remain anonymous has 30 cars pending processing at a Djibouti port after taxes were increased.
“The removal of the tax deduction will cost me a minimum of 80,000 Br on each vehicle,” he told Fortune. “In Ethiopia, where the public transport service is not adequately available to satisfy the growing demand, people should not be discouraged from having their own car to help alleviate the transportation problem.”
The earlier tax regime allowed a tax deduction of 30pc for second-hand imported cars older than three years and above to account for their depreciation. The rate of tax deduction was only 10pc for cars manufactured not earlier than 2018, while it was 20pc for those vehicles manufactured after 2016.
The removal of the 30pc tax deduction has immediately led to a spike in the price of second-hand cars, ranging between 80,000 Br and 100,000 Br. As a result, a 2001 Toyota Vitz, which sold for 250,000 Br, is now selling for almost double that price.
One of the reasons for the removal of the tax deduction was the increasing number of road traffic accidents, in a country where 163 people of every 100,000 in population are victims, closely associated with the mechanical conditions of second-hand vehicles.
The regulation has also been intended to address the problem of air pollution from the exhaust pipes of older cars; their fuel inefficiency compared to newer cars; and to reduce the associated costs for repairs, which also requires importing spare parts.
There are around a million cars in Ethiopia for a population of 100 million plus, marking one of the lowest car-to-population ratios in the world. Around 135,000 cars were imported into the country in the last fiscal year, increasing by more than 30,000 vehicles compared to the previous fiscal year. About 85pc of all cars in Ethiopia are used and mainly imported from the United Arab Emirates, while almost 90pc are Toyota models.
Vehicles imported into Ethiopia are subject to five different types of taxes: customs duty, excise tax, value-added tax (VAT), surplus tax and withholding tax. The rate of tax applied to each vehicle varies substantially with the engine power of a specific car.
Yohannes Woldegebriel, a tax law expert who was a prosecutor of the former Ethiopian Revenues & Customs Authority, said the new regulation has been long overdue, and extensive discussions have already been made before the introduction of the latest revision.
“The four-month transition period has been more than adequate for the importers to make the necessary adjustments,” he said.
PUBLISHED ON Nov 16,2019 [ VOL 20 , NO 1020]
Radar | Jul 31,2021
Radar | Feb 12,2022
Radar | Jul 13,2020
Radar | Jun 11,2022
Fortune News | Feb 12,2022
Fortune News | Feb 05,2020
Fortune News | Nov 13,2021
Radar | Jul 23,2022
My Opinion | Dec 04,2020
Fortune News | Jun 26,2021
Jul 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
Nov 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
Nov 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
Oct 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country's most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or two...
Nov 26 , 2022
In the wake of the liberalization of the telecom sector, Ethiopian authorities have m...
Nov 19 , 2022
The rounds of talks to end wars in Ethiopia held in Pretoria, South Africa, and Nairo...
Nov 12 , 2022
Two weeks have passed since negotiators from Ethiopia's federal government and the TP...
Nov 5 , 2022
Hardly were people prepared for the deals announced last week from Pretoria, South Af...
It is difficult to find a society void of stereotypes. The level and how much those p...
Or see contact page