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High duty takes toll on importers of used cars

Gazi Towhid Ahmed
Importers of used cars are going through tough times due to a high import duty and a cut in car loans by banks, businesspeople said.
Imports of used cars fell by more than 46 percent to 6,700 units during the January-June period this year, compared to the same period last year, customs data showed.
Local car sellers imported 12,500 units duringjanuary-june lastyear.
“A high import duty and declining car finance by banks affected imports,” said Habib Ullah Dawn, a former president of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA).
Banks earlier financed up to 70 percent of the value of a car. Now the maximum limit for financing is 30 percent, he said.
In the current budget, the government imposed a 45 percent supplementary duty on the import of a car with an engine capacity of 1.5 litre.
As a result, the total tax burden would be 129 percent on these vehicles, he said.
People's purchasing capacity has been on the decline in the recent times mainly due to a lack of liquidity in the banking channel, Dawn said.
Imports of used cars more than halved to 9,600 units in fiscal 2011-12 from 19,823 units in the previous year, according to BARVIDA statistics.
Dawn said the government increased import duty in each of the last
three budgets.
Moreover, the importers are in trouble as the Japanese currency became stronger against the dollar, he said, adding, “We are losing $3,000 more on each 4-litre car.”
More than 80 percent of Bangladesh's imported cars are reconditioned or used, mainly sourced from Japan and used by middle-income people.
Dawn said the government imposed a total of830percent duty on import of a four-litre car, which is the highest in the world.
India manufactures cars and yet has never imposed import duty more than 500 percent on used cars, he said.
Dawn, owner of Auto Museum, said the government's revenue from the sector has declined.
Compared to the previous year, revenue declined by 50 percent to Tk 1,100 crore last fiscal year, he added.
The local market of used cars witnessed a boom in 2009, when more than 38,000 units were imported, thanks to a surge in bank finance and a buying spree by the emerging upper middle class.
Bahalul Haque, owner of Modern Auto, said, "People ask about car prices, but do not buy.” It is difficult to continue business, said Haque.
He demanded the government rationalise the import duty structure of old and new cars to ensure fair prices.
A balance between the import duties on reconditioned and new cars will remove the discriminatory prices in the local market, while the government will be able to realise a significant amount of additional revenue, he said.
***Imports of used cars more than halved to 9,600 units in fiscal 2011-12 from 19,823 units in the previous year, according to BARVIDA statistics****