Advertisement

High tariffs fail to discourage car imports

Saturday September 24 2016
cars

Imported second-hand vehicles. Kenya and Rwanda vehicles imports have shot up despite East African governments raising exercise duty on used cars. PHOTO | FILE

Kenya and Rwanda vehicles imports have shot up despite East African governments raising exercise duty on used cars.

This is likely to expose the two economies to higher inflation as the Japan Yen has strengthened against the dollar.

The trend also exposes the region to pollution.

While the total number of vehicles the two countries have imported in the past eight months is not known, car dealers say over 70 per cent of used vehicles in the two countries come from Japan.

In December 2015 after the Kenyan authorities enforced a new tax regime, imports dropped, but the number started picking up, settling at 13,693 units in April from 10,280 in March 2016, according to New York-based Trading Economics, a trade research organisation.

For Rwanda, 1,200 more units were imported in the first eight months of this year, a number which is higher than 3,215, which were recorded during the same period last year.

Advertisement

“The numbers of vehicles imported in the country keep increasing as people’s incomes improve,” said Raphael Tugirumuremyi, Commissioner for Customs Services at Rwanda Revenue Authority.

READ: EA states join hands to ban importation of used clothes, cars

No speculation

“It is not that speculators were rushing to stock before the new tax was enforced,” he added.

Currently, vehicles imported into the region, which are 10 years and above attract an 80 per cent depreciation rate, while new ones attract 20 per cent. The new taxing regime came into force after concern that vehicle importers were taking advantage of the variations in the maximum age rule to circumvent it was raised.

But this restrictive excise duty has played little to reduce the appetite for used vehicles, resulting in a rise in inflation in Rwanda.

The franc has also taken a beating against the dollar with increasing imports not helped by falling exports. As of last week, the franc had depreciated by 7.6 per cent on Monday from 747.6 it was trading in March this year.

The imported inflation in Rwanda reached 5.2 per cent in July from 3.9 per cent in June and 4.1 per cent in May.