FinMin prepares to dampen firey auto market
A proposed increase on excise taxes for automobiles could cool the nation's hot auto market by 10% next year, an analyst said last week.
The Finance Ministry is currently considering raising excise taxes across the board for domestic and imported economy and luxury cars by about three to six percentage points. If approved by the Finance Ministry, the tax would become effective Jan. 1, 2000.
"That of course can influence the market," said Wojciech Drzewiecki, head of auto research company Samar.
But it likely won't cool things down this year. By the end of September, auto sales hit 478,000 units sold, far above expectations and well on the way to 17% growth by year's end," Drzewiecki said. At mid-year, auto sales were forecast to grow 8-10% this year, up slightly from last year's 7% growth.
Under the proposed rules, locally produced cars with an engine capacity of less than two liters would be subject to an excise tax of 6%, while larger cars would pay 15%.
The current rate on smaller models is 2% and 10% for larger, luxury models. Imports would pay 6.4% on small vehicles under the proposed rules, compared to 2.3% now, while larger ones would be subject to a 17.6% tax compared to 11.1% presently.
Despite the higher tax rates on imports, cars from European Union (EU) countries could be cheaper than those produced domestically, at least in terms of taxation. Beginning next year, import duties will drop five percentage points on cars from the EU, from 15% to 10%. By 2002, the import duty for cars coming from the EU will disappear altogether.
Regardless of any cost offsets on imported cars, the excise will have one definite effect. "Because of this, larger cars will not be as accessible," said Wlodzimierz Kiepurski, general secretary of the Association of Car Importers. This will cause many to revert to smaller cars, which already make up the vast majority of the nation's total auto sales market.
In related news, the Treasury Ministry denied rumors last week that the government or lawmakers were considering a separate tax on cars to help fund construction of highways, said Elzbieta Jeranowska, spokeswoman for the Treasury Ministry.
Earlier last week, local daily Gazeta Wyborcza reported that members of the Sejm proposed introducing a tax to back highway construction, a move allegedly supported by Deputy Transportation Minister Witold Chodakiewicz. What happened, Jeranowska said, was that a vice minister said during a session that if funding could not be found to build a highway, then other means would have to be found.
