URA vehicle directive excites, pinches new & used car dealers

Following East African Management Regulations 2010, the Uganda Revenue Authority (URA) has informed the public that effective July 1, vehicles of nine years old or more from the date of manufacture shall no longer be cleared under warehousing regime.

This has left traders under KACITA protesting, saying it is a move to kick many out of business.

Last week, the official dealers of Nissan vehicles, Motorcare Uganda launched one of the most sophisticated vehicles on the market today, the Nissan Terra and Nissan Leaf.

The two vehicles are fully automated with a bevy of intelligent driving features and zero carbon emissions because they are fully electric.

According to the managing director, Florence Sempebwa Makada, these are the vehicles of the future, fitted with the latest technology and comfort, and have already began capturing ground.

“Manufacturers all over the world are doing away with old technology, because the world is changing fast. Technology is influencing every decision we make right from home, in the board rooms, people’s choices, to customer preferences and so on. This means that we have to be mindful as we respond to their needs,” she said.

Makada says it is expedient, therefore, for the Government to progressively phase out the importation of used cars in order to promote the sale and use of new ones.

Presently, for instance, new motor vehicle sales stand at an average of 2,500 cars per year, a number that is far below imported used cars, standing at an average of 65,000 units per year.

She says if encouraged, Ugandans can fully resort to purchasing new vehicles and ditch the use of environmentally unfriendly used vehicles in a matter of time.

“It is not that we do not have a big market for new cars in Uganda. Its just that we have an option that appears to be cheaper and almost naturally, people opt for it to save, but in reality, it is expensive,” Makada said.

As the launch was ongoing, the Kampala City Traders Association (KACITA) was separately protesting a new Uganda Revenue Authority (URA) warehousing directive which is phasing out the warehousing provision for vehicles above nine years from the date of manufacturing.

The directive comes into force on July 1.

The directive also mandates importers of such cars to pay their taxes under the East Africa Community’s Single Customs Territory (SCT) at the port of entry, that is in Mombasa or Dar es Salem, before entering Uganda.

SCT allows members of the bloc to jointly collect customs taxes.

“Pursuant to section 64 (k) of the East African Customs Management Regulations 2010, URA wishes to inform the general public that effective July 1, motor vehicles of nine years old or more from the date of manufacture shall no longer be cleared under the warehousing regime,” URA said.

It added: “The customs clearance of such motor vehicles shall be facilitated under the SCT arrangement where taxes will be paid on arrival at the port of entry into the East African Community.”

According to KACITA, majority of the cars sold are beyond nine years of age and therefore, the new measure is likely to increase their operation costs, the final price of the cars and eventually kick them out of business.

KACITA says this will also deny many Ugandans a chance to own vehicles because the newer models are expensive for the ordinary Ugandan.

Loss of jobs

Issa Sekitto, the KACITA publicist, says a multitude of people are also likely to lose jobs since majority of the dealers will most likely be forced to quit the business.

“The East African Customs Management Act provides for 270 days for one to have cleared taxes on such imports, which we think URA should use instead of implementing the new regulations. From our perspective, it is as if they badly want us out of business,” he said.

In response, URA’s publicist, Ibrahim Bbosa, says the same law, in section 64k, allows the commissioner for customs to prescribe the nature of goods and location from which they must be cleared.

“In doing this, therefore, URA is acting within the law in the interest of effective service delivery to the country,” he said.

Bbosa said the taxman also based their decision on the fact that a huge number of cars have been lying idle in bonds, holding potential revenue at inertia of rest.

He said the Government is incurring colossal sums to put the vehicles to auction, a situation that can be avoided by clearing the taxes at the port of entry.

Bbosa adds that the move is not aimed at increasing the taxes, but hastening the process of clearing the vehicle before it can be kept in the bond.

Previously, the Government has said it is determined to phase out used cars in the long run and as the country industrialises, it will support automobile manufacturing and assembling plants in the country.

The state minister for investment, Evelyn Anite, says efforts are ongoing to ensure that the country commences production of its Kira vehicles, fitted with the latest technologies in order to address current market needs.

She says the Government has also encouraged and given incentives to several investors interested in assembling vehicles and already the Metu Bus Industries is Assembling buses in Namanve with capacity of 20 buses a month.

“The country is not worried about the market, because Uganda is strategically located and can easily supply to a market of more than 150 million people in the east Africa region,” Anite said.

Under the current arrangement, car dealers importing for the Ugandan market are allowed to store their units in bonded warehouses, pending payment of customs duties.

According to Sekitto, the arrangement is convenient for the dealers because it eases their liquidity pressure and allows them to import more units.

However, under the SCT system, things will be tougher for Ugandan importers, because they would each be required to pay relevant taxes upfront to facilitate the export process.

Sekitto says this will have a devastating cash flow impact on many dealers, forcing them to downsize their imports or fold.

In 2018, EAC member states agreed to put a cap on the age limit for imported used cars to five years by 2021, which appears all member states have failed to enforce.

And although Uganda’s move is a measure to bring the country’s car age limit within the EAC resolution, the car age limit is still higher than five.

In Kenya, the car age limit for used vehicles was kept at eight, while Tanzania requires used h-vehicles imported into the country to not be more than 10 years. Rwanda, Burundi and South Sudan have no formal age limits for used cars.

Motor vehicle imports form one of the largest imports with Ugandans spending above sh2 trillion annually, according to data from the finance ministry.

Vision 2030

According to President Yoweri Museveni, Uganda will be producing at least half a million vehicles per year by 2030, in a move aimed at promoting import substitution in the automotive industry.

The President says vehicles, parts, components, systems and mobility engineering services will be exported to the region and the global market.

Museveni says with locally built vehicles, Uganda will easily build an efficient, integrated, sustainable, safe and inclusive public transport system, which is currently desperately needed.

According to the President, the Government is committed to working with the private sector, academia and development partners to ensure that as many parts of the bus, trucks, pickups, SUVs, two-three wheelers and tractors, among others, are made locally by Uganda’s scientists and artisans.

Factories manufacturing 65% of the required vehicle parts locally are expected to sprout by 2030, employing over 100,000 people.

So far, the Government has since funded the construction of the Kiira vehicle plant that sits on 100 acres of land at the Jinja Industrial and Business Park and already, the Kiira EV and Kayoola buses have taken test drives.

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