The Uganda Revenue Authority cleared less motor-vehicles into the country in 2015/2016 than it did in 2014/16. The decline was caused by a big fall in the number of used vehicles cleared; the number of new cars and total taxes collected from vehicle imports rose, however.
In 2015/16, 34,941 vehicles were cleared by the URA compared to 51,629 vehicles in 2014/15. Fewer used vehicles – 18,922 – were cleared in 2015/16 versus 35,901 in 2014/15, a 47% drop. Goods carrying vehicles also fell by 2.8% to 12,659 vehicles cleared in 2015/16 from 13,032 vehicles the previous period. However, new vehicles rose by 24.6% in 2015/16 to 3,360 from 2,696 the previous year.
What caused the fall in total vehicles cleared, and why was its biggest impact on the used vehicles category?
Doris Akol, the URA Commissioner General, said the rise in the environmental levy at the start of the 2015/16 financial year is responsible for the fall in the number of used vehicles cleared. The levy was increased in the 2015/16 budget from 20 % to 35% percent of the cost, insurance, and freight value for vehicles between 5 and 10 years old, and to 50% percent for those older than 10 years. It however excluded goods vehicles.
Predictably, the increase in the levy led to a rise in the cost of used vehicles, which in turn led to lower sales. It was unsuccessfully opposed by used car dealers, who have said it hurts their businesses dues to fewer sales. A used car dealer we spoke to said sales have gone “down; it’s not like before.”
URA statistics show that the number of used vehicles cleared spiked sharply in June and July 2015, as importers rushed to beat the deadline; June was the last month before the levy became active. Used vehicles cleared in June 2015 were 5,883 versus 2,961 the previous month and 1,056 in July.
The revenue authority and other government officials have always maintained that the tax is necessary to protect the environment because older cars are heavier polluters. But they could have another reason to defend the levy; it has not hurt revenue collections.
Taxes collected from vehicle imports in 2015/16 increased by 0.7% compared to 2014/15, to Shs407.06 billion from Shs404.17 billion. The increase is a result of the higher levy, which offsets the drop in vehicles cleared, as well as the rise in the number of new vehicles imported.
The government, according to representatives of new car dealerships we spoke to, is the biggest buyer of new cars, followed by non-governmental organisations. But there was one exception; a sales executive at Spear Motors said their biggest customers are “the business community, CEO’s, managing directors, and chairmen of companies.” Spear Motors is the official distributor of Mercedes-Benz, Fuso, Jeep, Chrysler and Dodge vehicles.
General sentiment among new car sellers is that taxes on new cars are still very high and discouraging to individual consumers. In addition to lowering taxes, they also want authorities to follow Kenya and put a limit on the age of cars imported into the country. Motor vehicles older than 8 years are not allowed into Kenya.
URA figures show that tax collections from vehicle imports in the first three months (July -September) of the current financial year increased compared to collections from previous corresponding periods. They are up 8% compared to the same period last year, and rose 15% versus the same period in 2014/15. Shs106 billion was collected, compared to Shs98 billion last year and Shs92 billion in 2014/15.