URA! No Sense in Car Tax Policy!

Imported cars heading for Uganda

Written by Faith Natunga

The move by URA and the government to ban the import of cars that are more than 10 years old is grounded on the false assumption that a significantly large percentage of the population can afford to buy and maintain a car that is over 50 million Uganda shillings (UGX).
Access to cheap second-hand cars is vital for the Ugandan economy for various reasons. A good number of the population is self employed and having a personal car is a lifeline for the transportation of their goods and services.

An ambitious agriculturalists in Masaka will find it profitable to buy a mini track for UGX 30m to get their produce to the markets in Kampala by Saturday morning. If you are an early bird and want to buy your produce right off the trucks at a much cheaper price you will often find these trucks at any market in Kampala. Second-hand cars are also vital to the working class as they offer a cheap, and convenient way of getting to and from work comfortably avoiding the ridiculously long lines and muddy maneuvers associated with a rainy day in Kampala. Even with the wealthy; second-hand cars are a good alternative for the frequent trips upcountry for which an Audi TT is not well suited.

The real problem is not the availability of cheap old second-hand cars, but rather the ridiculous taxes on newer models, the poor road infrastructure and lack of adequate public transportation.

The current system by URA to evaluate the market price of the car by the year and model having a total disregard to the actual purchase price of the car is a flawed concept. If you are to buy a 2010 Toyota Landcruiser for UGX 90m, URA will do its own evaluation and charge you a tax of 66.17m which comes up to almost 75% of the purchasing price. The problem with this assessment is that it disregards the fundamental fact that a car is a commodity that depreciates in value the moment you drive it out of the dealership. The reason for the lower asking price from a dealer in Europe could be the mileage on it, minor faults… The car market in Europe is such that the availability of newer models, a leasing and financing system ensures the client has access to newer models. This ensures an abundance of second-hand vehicles in relatively good condition.

The ability for a Ugandan car dealer to obtain a good deal on a newer model in relatively good condition should not warranty punishment by setting such ridiculously high taxes.

The availability of poor quality second-hand vehicles in the Ugandan market has more to do with the ridiculous taxes charged for newer models, leading car dealers to avoid extra costs by flooding the market with older models. If this new policy is implemented, the losers yet again are the majority who are unable to purchase vehicles at such high prices due to the tax policy which pays no regard to the resale value and actual purchasing cost of the newer models. It is easy to blame the easy access to older cheap models for the current congestion and smog in the city, but the real problem is the poor road infrastructure; we need not explain further as all one needs to do is step out of their house to experience the poor state of the roads right from their gate. One should not get fooled by the highways going upcountry either, for when you get off the highway you will be lucky to arrive at your village home without needing some painkillers for your back. To add to this is the lack of comfortable, organized affordable public transportation.

We need to create a pedestrian friendly city so that people are able to leave their cars at home for the upcountry trips and use public transport or even walk or cycle to work.

By implementing this law the government is leading down the wrong path as this will only limit the general population that is mostly self employed access to second- hand cars. They are a vital economic tool that should not be taken lightly. There are old models all over the world you often see on a lovely sunny summer morning several people in London pull out their Model T 1910 model and drive then comfortably for miles. In Uganda a 2012 Audi TT can lose its shelf life in one week on just one trip deep down in the villages of Kanungu. We are a nation of investors and buying a new 2012 model to ferry my goods on poorly build road infrastructure doesn’t make economic sense. Furthermore; new models are expensive in the long run as any fault will require an expensive spare part that can not be obtained in the Ugandan market often adding to the cost of maintenance. You will often want to treat your new car delicately as any major damage will lead to expensive repairs.

A well maintained second-hand car does not harm anyone; poor road infrastructure does!

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6 comments

Ilove the site its so educative I wish we pick a leaf this is very true let government look at tis before it starts implementing things.Thanks
FAITH.

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