BISHKEK: Kyrgyzstan car importers staged a rally in Bishkek to protest a hike in the customs duty rate, asking the government to postpone the new rates for a month, so that they could clear the cars as per 2014 tariffs.
The government says the customs duty rates should be raised in any case to meet the requirements of the Eurasian Economic Union (EEU), of which Kyrgyzstan will be a full member in May 2015.
According to the Government regulation, from September 22, 2014, there was a gradual increase in the single customs duty and tax for imported motor vehicles, with the duty for cars with small-volume engines having increased by ten US dollar cents per each cubic centimeter from January 1, 2015. If the engine volume is more than three thousand cubic centimeters, an increase is 15 cents.
The Economy Ministry explained that the number of imported vehicles has been growing rapidly in recent years. According to customs statistics, Kyrgyzstan annually imports more than 60 thousand cars older than ten years, which cause increased air pollution. Moreover, the road infrastructure develops very slowly and cannot serve the current number of vehicles. The duty rates will be raised so as to make the import of old cars unprofitable.
Protesters at the rally claimed that the Government’s decision to raise the customs duties was made prematurely, because it is related to Kyrgyzstan’s entry into the EEU and should therefore come into force not earlier than in May 2015. According to the protesters, first, it is necessary to create proper conditions at customs posts whose heavy workload has resulted in customs clearance of cars standing at the border since December 2014 being delayed until 2015.
Over 800 car importers signed an appeal to the Government for permission to pay customs duties for imported cars in 2015 at the rate of 2014. Now they have to pay five times as much — $0.5 instead of $0.1 per cubic centimeter of engine volume.
The Economy Ministry responded that it sees no good reason for the extension of the timing of customs clearance. The Government resolution on increasing customs duties for imported cars was discussed in June 2014, and it was agreed that the increase in duties will be carried out in five stages. The first one was introduced in September 2014, and the second one in January 1, 2015. Further hikes will take place each following year.
If Kyrgyzstan annually increases the duty by 10 cents, it will take 20 years to come up with the EEU rates. But the EEU members gave Kyrgyzstan only five years. It was therefore decided to raise the duty annually by $1 per one cubic centimeter of engine.
People who ordered cars from abroad are also unhappy because their prices have jumped significantly. For instance, under the old scale, the customs duty for a car made in 2003 with the engine volume of 2,000 cubic centimeters was $800, and according to the new scale it has jumped to $5,200. Car-importing firms say the government initiative will lead them to bankruptcy. The new customs duties will sharply increase the prices of cars in the local market. The Government should make the hike in the duty rates less painful for people and businesses.
To solve the problem requires changes to the law, Kyrgyz Deputy Prime Minister Valery Dill said at a press conference in Bishkek on January 23, after he met with the unsatisfied entrepreneurs. “We [the government] warned them back in September 2014 that the customs duties will be raised in 2015 but at the same time we have to react because it is our people. We live in a parliamentary country, where the Government is a collegial body and no one can make a single-hand decision. To solve the problem, we have to either change the law or the state budget, or to pay these people which would mean a loss of budget revenues,” Deputy Prime Minister said.
Ordinary people are afraid that if the cost of customs clearance of imported cars reaches the level of Kazakhstan and Russia, a car will become a luxury in Kyrgyzstan. The EEU countries have higher customs tariffs than in Kyrgyzstan but the income of their citizens is higher than in poor Kyrgyzstan. There is also a well-developed lending system for buying cars in Russia and Kazakhstan. In Kyrgyzstan, the customs duty increase would mean a strong blow at both car importers and the population.
