"Euro-car plates" issue: The state and consumers should find a compromise

Author : Oleksiy Kushch

Source : 112 Ukraine

Kyiv downtown has stopped; the owners of the cars with the European car plates gathered for a protest, demanding "affordable customs clearance"
23:27, 12 July 2018

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For many years, Ukraine has been experiencing unique automotive inferiority. On the one hand, one of the largest world markets for used cars and the production of new ones is located next to us, and on the other hand, the prices for cars in our country far exceed the neighboring countries. For example, new European cars in Kyiv are at least 10% more expensive than in Moscow. For years, primitive political lobbying has created unique opportunities for local wheeler-dealers. Ukrainian car market was stuffed with the models, assembled from improvised Chinese details at several factories.

The Poles, Czechs, Hungarians, Bulgarians, Romanians, and all those who joined the friendly family of free European nations have fully felt what it means to live next to a large market of used cars. Now students and pensioners of these countries use quite common cars. And horror stories about cluttering the territory with a bunch of old cars did not work there. In this respect, Ukraine is a unique country indeed. After all, we have a light industry, but at the same time, we import tons of second-hand clothes, popular among a large part of the population. Domestic enterprises are forced to reduce production capacity or look for complex ways to foreign markets. Our country almost has no motor industry (automobile), except for one factory which for a long time already does not please us with the new models. But the "second hand" car scheme is almost completely blocked. And all because the domestic nouveaux riches do not know how to manage complex industries and work with "delicate" markets.

Related: Sales of used vehicles in Ukraine grow by almost 80% in March

As a result, the state has faced a completely uncontrolled mass of cars, the owners of which practically do not pay anything to the budget. In addition, the situation is also threatening in terms of monitoring traffic safety. After all, it is almost impossible to hold drivers of cars accountable.

That is why the society needs to legitimize all the cars that came to Ukraine, taking advantage of loopholes in the current legislation. Two bills (No. 8487 and No. 8488) on this issue were prepared by people's deputy Nina Yuzhanina.

One of them sets reduced rates of excise duty charged on imported cars. Before May 16, 2008, that is, before Ukraine has joined the WTO, import of cars older than 8 years was banned. The reason was the government's concern for the environment. After Ukraine's accession to the WTO, this ban was abolished, but the new fees made the import completely unprofitable. Later, there were some restrictions on the import of cars that do not meet Euro-3 - Euro-5 standards. At the same time, thousands of Soviet-made vehicles were used, the ecological norms of which do not hold water, but this was not taken into account.

Related: The law on Euro-plates: The rules of the game

So, the excise duty rate for cars with engine power up to 1500 cu. cm is up to 100 euros, with a capacity of 1500-3000 cu. cm is 5-11 times higher, and if the engine is over 3000 cu. cm, it is 100-150 times more.

In 2016, the excise duty rates for passenger cars manufactured after 2010 and meeting the Euro-5 standards were equal to the payments collected from the new cars. As a consequence, last year almost 71 thousand cars were imported to Ukraine under this preferential scheme, and the budget was replenished by 0,2 billion USD of payments. As for new cars, 80.6 thousand were imported in 2017 (0,6 billion USD were paid to the budget).

Related: Protests near Parliament, Kyiv downtown blocked by drivers of cars with EU license plates

At the same time, a significant number of cars were brought to Ukraine using the so-called temporary stay regime. Their owners have paid almost nothing to the budget, but the problem itself has long been systemic and it cannot be solved by fines.

As of May 1, 2018, 315,000 cars imported through transit and temporary schemes have not left the territory of our country yet, of which 125 thousand have violated the deadlines. Since January 1, 2016, more than 2 million vehicles have entered the territory of Ukraine according to the above rules. By the way, only 198 thousand of their owners bought the insurance (as of May 1, 2018, according to the Motor Insurance Bureau). According to the police, last year 10 thousand traffic accidents involving cars with foreign registration, or 9% of the total number, were committed.

To correct the situation, lawmakers propose to radically change the methodology for calculating the amount of excise. Only two basic rates will be set: 50 euro for a car with a gasoline engine of 1,000 cu. cm; 75 euros for diesel of the same power. As for other cars, for them, the excise tax will be determined by a special table, where rates are set for each category.

Related: Lithuania investigates legality of import of cars with European license plates to Ukraine

The tax system used today should be substantially simplified for the Ukrainians could really feel the closeness to Europe and benefit from their successful geographic location, at least in terms of the opportunity to buy used cars. The excise should be simply canceled. The excise nature of this type of commodity is very doubtful from the point of view of the fiscal theory. Customs duties for cars from the EU and value-added tax should be replaced by a single tax in the amount of 10% of the value specified in the invoice or other documents confirming the purchase. And no binding to the volume of the engine, because the state of the car and its market value are determined by a whole set of relative and quantitative factors. When applying a simplified taxation scheme, the customs clearing of a very decent foreign car with a price of 10,000 euros would cost 1000 euros, and a "student’s" of 5000 euros would cost only 500. In this case, one could speak not only about filling the budget and ensuring road safety but also about achieving a certain balance of social justice. Unfortunately, the deputies are not yet ready for it. On the one hand, they try to ease the rules, and on the other, they try to tighten the "tie" on the people's neck.

Related: Cars with Ukrainian plates to be fined in Crimea starting April 1

 So, the flow of illegal cars will resemble a full-flowing river, and increased fines will only enrich those “with epaulets.” After all, as practice shows, making a Ukrainian pay “unfair” tax is almost impossible. Even stimulating it with reduced excises and high fines do not help. He would rather pay bribes. It is proved by the story of thousands of "customs families" and the dynamics of filling the budget for the last 25 years.

This column does not necessarily reflect the opinion of the editorial board or 112.International and its owners.

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