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New auto policy as economic drain pipe

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New auto policy as economic drain pipe

The auto policy meant to facilitate trade and stimulate the economy has become a revenue drain pipe as vehicles are being imported as Complete Knocked Down(CKD) parts, which attracts zero duty tariff. BAYO AKOMOLAFE reports

 

Four years after the national automotive policy was introduced in order to gradually phase out used cars in the country, some auto assembly plants are conniving with port officials to defraud government.

 

 

The Senate Committee on Customs, Excise and Tariffs said that the policy had become drain pipes due to the illegal practices among customs officials and auto assembly plants. The policy is an import substitution strategy to reduce importation of vehicles and boost the capacity of domestic vehicle assembly plants.

 

Past record

 

Before now, Customs duties paid for the categories of vehicle include cars -30 per cent, buses – 15 per cent, trucks -30 per cent and completely knocked down vehicles – five per cent.

 

Other taxes are the Comprehensive Import Supervision Scheme (CISS), one per cent, National Automotive Council, two per cent, VAT, five per cent and ECOWAS Trade Liberalisation Scheme (ETLS).

 

Specifically, the policy was introduced to cut the amount spent annually on importation of vehicles. According to the Director General of the National Automotive Council (NAC), Mr. Aminu Jalal, Nigeria is spending about ₦600 billion to import 400,000 units yearly on used and new vehicles.

 

The policy

 

Its implementation commenced in July 2014, shortly after it was introduced in October, 2013 with high-priced tariff on imported fully built vehicles.

 

The policy also offered tariff rebate for CKD and Semi Knocked-Down(SKD) meant for assemblage of vehicles in the country. Because of the policy, importers and car dealers, who formerly paid 20 per cent duty and two per cent levy on new cars, were asked to pay 35 per cent duty and another 35 per cent levy.

 

Challenge

 

However, trouble started recently when the Senate Committee on Customs, Excise and Tariffs accused Nigeria Customs Service (NCS) of granting assembly plant owners zero duty on new imported vehicles.

 

Its Chairman, Senator Hope Uzodinma, during its oversight visit to the Tin Can Island Customs Command, Lagos, complained that the sharp practice among the NSC officials and auto plants had resulted in over N5 billion revenue loss. He explained that apart from the Chinese branding in Nnewi, Anambra State by Innoson Motors, 90 per cent of vehicle importers enjoying the status of assembly plants were traders.

 

He alleged: “They bring most of these new vehicles into Nigeria through Tincan Island in the name of Complete Knocked Down (CKD) parts. These vehicles are cleared by NCS and they are cleared at zero duty tariffs. “We want you to place on hold such containers, invite the owners to open them so that for once, we can confront those behind this illicit act.”

 

Uzodima explained that these policies, which were meant to facilitate trade and stimulate the economy, had become drain pipes due to the illegal practices.

 

The chairman also noted that some shipping companies and authorities outside the country had confirmed that such vehicles were fully built vehicles. Uzodinma added that while genuine vehicle importers were levied 70 per cent duty, those behind the illicit trade enjoyed zero duty.

 

Also, a member of the committee, Senator Ali Wakili, urged the Area Controller of the command at Tincan port, Comptroller Mohammed Abdullahi Baba Musa, to block all leakages.

 

 

Complaints

 

It would be recalled that last November, the Lagos Chamber of Commerce and Industry (LCCI) had complained that there had been an increase in the price of vehicles by between 100 per cent 400 per cent.

 

The chamber’s Director- General, Mr. Muda Yusuf, said that the affordable vehicles promised by government at the inception of the policy were yet to be seen. He noted that the economy had suffered incalculable consequences and shocks as the cost of vehicles had attained the levels that were unprecedented in the history of the country.

The director general noted that the increase in duties on imported vehicles introduced four years ago to encourage investment in local assembly plants had failed.

 

To this end, he urged the Federal Government to consider zero duty for assembly plants. With a zero per cent duty on the SKD, Yusuf explained that more jobs would be created in the automobile industry, maritime sector activities would be boosted, car assembly plants would be better off and the middle class would have better access to vehicle ownership.

 

He said: “The vehicle assemblers are dependent on imports just like the importers of vehicles. This is not in consonance with the objective of import substitution strategy, which thrives better in the context of high domestic value addition.

 

“The economy could only benefit from the inherent values of import substitution, which includes backward integration, multiplier effects, conservation of foreign exchange, job creation and reduction of import bills.”

 

Last line

 

Government should block every loophole created at the port in order to boost revenue and promote trade.

 

 

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