Registration taxes on second hand imported cars should not be increased

The Used Vehicles Importers Association is confident that the government would not increase used vehicle registration fees to make its members' businesses uncompetitive, Association legal advisor Dr Emmanuel Mallia yesterday told The Sunday Times in an interview:

"We have lobbied with the Finance Minister whom we are due to meet tomorrow, as well as Minister for Transport Censu Galea and Parliamentary Secretary Edwin Vassallo.

"We are confident that the Government will understand that it will be wrong to increase registration fees, thus making our members' businesses uncompetitive.

"If this were to happen, it will mean that a minister has the power to, by the stroke of a pen, help one party get rid of another and create a monopoly as a result.

"We do not believe that the Finance Minister or his Government has such undemocratic concepts in mind."

Dr Mallia was reacting to what he described as a campaign by the Association of Car Importers Malta aimed at trashing UVIA and its 28 members.

He said UVIA held an extraordinary general meeting on Friday to inform members of developments since the last such meeting in September.

ACIM, Dr Mallia said, had explicitly asked the government to increase registration fees on imported second hand cars.

As a result the UVIA had had to lead its own campaign to rebut what was being said by ACIM. Dr Mallia pinpointed how ACIM had directed its campaign basing itself on a number of unfounded assertions. ACIM said that the second hand imported vehicles were a hazard to the environment due to pollution, that UVIA members paid lower registration fees and that such registration taxes should be increased as a result of the polluter-pays principle.

Dr Mallia explained how all this criticism was destructive and how UVIA showed that ACIM's reasons were untrue. UVIA showed throughout its campaign that vehicles imported by its members fully conformed with the Malta Transport Authority and EU specifications, and were certified accordingly by an internationally approved agency, in line with the legal notice published last April and which came into effect in June.

Dr Mallia said that in its adverts ACIM tried to denigrate UVIA by using certain phrases such as "you cannot trust them, you cannot trust their product". Or that cars imported by UVIA were uncertified. This was very low lobbying and it attracted more sympathy to UVIA's cause.

"Even their argument to increase registration tax in order to operate the pollute as you pay principle is not in line with the real significance of the term. In other countries this term means that if a vehicle, after it is annually tested, has a poor emission standard, then it should pay more annual road tax. It has nothing to do with registration tax."

ACIM, Dr Mallia said, had also said that the second hand cars being imported to Malta were among those which Japan exported to second and third world countries and which Japan was dumping into other markets. UVIA has shown yet again that this statement is not true.

The truth is that the second hand market is a big industry in Japan and 900,000 second-hand cars were exported each year. The situation is that new cars in Japan were cheap to buy new, but their road tax increased each year. By the third year cars would have to pay a very high road tax and many Japanese preferred to buy a new car instead.

This led to a flourishing second hand car industry. Hence one can see that it was not a question of cars that were being dumped. These cars were relatively new and in very good working condition. Japan exports thousands of these cars to countries like the United Kingdom, Cyprus, Australia and New Zealand which are definitely not third world countries.

The Maltese importers, Dr Mallia said, were represented in Japan by agents, who bought the cars from auctions. Auction standards were very high and certificates issued at auction level reflected the real condition of the cars. Moreover, before being imported to Malta, the vehicles were also certified by the Vehicle Certificate Agency, which is part of the British Transport Ministry, according to Malta Transport Authority and EU specifications.

UVIA throughout its campaign has shown that all the reasons brought forward by ACIM to increase second hand cars' registration tax were all excuses "to base an unjustified claim to Government. The real reason is that if the second hand cars' registration tax is increased, UVIA members will be uncompetitive, they will be out of business and ACIM's members will enjoy a monopoly."

Dr Mallia said it was also not true that second-hand sales had taken over 50 per cent of the market. It was true that there had been an increase in sales over the past year but, ironically, this was due to the new car importers who, with their pressures and destructive criticism, created a situation of instability and uncertainty for the second hand importers.

Because of this, the second hand car importers increased their imports as they were unsure, at the time, whether they could get the necessary certificate required by law. Now their commercial position is clear, UVIA managed, though at a very great financial cost, to ensure that every car leaving Japan is certified according to law.

Dr Mallia explained how, contrary to what ACIM was claiming, when it came to registration fees, these were generally higher for the second hand imported vehicles. The two markets were not on a level playing field. ACIM had a lot of strengths with the backing of the media and advertising. On the other hand, UVIA was strong because it persevered.

ACIM, Dr Mallia said, had the cheek to complain of not being on a level playing field.

But while cars imported by UVIA members had to have their registration tax paid as soon as they were cleared from Customs, new car importers members of ACIM had the registration fee paid only when they were sold. New car importers paid Government the registration fees when the client pays as part of the car's price while the used car importers had to find money immediately to pay the registration tax.

Used car importers also had to pay a minimum registration tax established by the government according to the car's engine power. On a 1,000 cc car a minimum Lm1,230 registration tax and value added tax had to be paid. The car also had to go through an evaluation by Customs and, if the Authority felt it should be valued at a higher limit, the UVIA member would have to pay according to the evaluation made, independently of what they would have paid for it.

As these cars came from outside the EU, importers also had to pay 12 per cent Customs duty on the car's value plus value added tax.

On the other hand, when a new car was imported, the government accepts the price declared on the invoice and they new car importers paid accordingly, when the car is sold.

Giving an example, UVIA president Oliver Brownrigg said that a registration tax of Lm4,600 were due on a used 2,000 cc car while only Lm2,491 were due on a new but identical car.

This showed that not only second hand car importers had to pay more, they had to pay it before. Where is the equal playing field, he asked.

Mr Brownrigg pointed out that UVIA members, who directly and indirectly employ around 500 people, paid roughly Lm7.5 million or so in registration tax in the first eight months of this year and another Lm2.5 million in Customs duty.

Dr Mallia said that one also had to consider the issue socially.

Second hand imported cars attracted a bracket of low to medium wage earners. In reality, these were not in direct competition with the new car importers. Persons driving old cars, which may not be roadworthy, may now be able to put together enough money to buy a second hand Toyota Starlet but not a new one.

Thus they now can drive a relatively new car, which would be safe and more environmentally friendly than their old one, which will now at last be scrapped. If the registration fee was increased, the government would be denying a great sector of the population the possibility of owning a relatively new car, which was in conformity with EU and Malta Transport Authority specifications, certified, and at a good price. Although new car importers might think that UVIA members were in direct competition with them, this was not the case.

One also had to keep in mind that when a second hand car was sold, less money was going out of the country and, as these cars cost less, they gave rise to less social problems as they were more affordable.

A car imported by a UVIA member is two to four years old and its average cost ranged between Lm3,500 and Lm4,500.

Though some new car importers think that UVIA members were in direct competition with them, this is not the case. Rather than taking the issue out on UVIA, ACIM members, should it be true that their business is declining, should see what they were doing wrong.

What seems to be true is that thanks to the second hand car importers, the Maltese consumer was now getting certain advantages. Giving an example, Dr Mallia said that what used to be sold as extras on a car, such as air-conditioning and power steering, now seem to be standard. One also notes that certain new car importers are now giving certain financial incentives.

Finally Dr Mallia stated that UVIA were confident that ACIM's claim will not be entertained by Government. The registration tax on second hand cars is already high. If it is increased, it is putting UVIA members and their employees out of a job. Government will be furthermore losing Lm10 million in tax. So good sense and social justice will undoubtedly prevail.