State Slaps 140% Tariff on Imported Cars

Imported cars, favored by Russia's nouveau riche as well as foreigners, are about to become even greater symbols of affluence as the Russian government raises import tariffs to 140 percent of the vehicle's purchase price effective Tuesday.


"My company and I have been living in fear of this since September," said Dmitry Yuroshkin, representative for Ford Motor Co. in Moscow.


The new 140 percent tariff represents a substantial increase from the previous taxes, which totaled on average about 93 percent of a car's sticker price.


It will apply only to car dealers and other businesses importing cars into Russia. Individuals will continue to pay duties of five ecus (a little over $5) per cubic centimeter of engine displacement on new or used imported vehicles.


A purchaser of a new Peugeot 45GR will now pay about $5,000 more in taxes, bringing the total cost of the car to $37,000, compared with a manufacturers' retail price of $15,300, according to Olivier Riviere, commercial delegate for Automobile Peugeot in Moscow. The purchaser will pay $21,600 in taxes, including customs duties, value added tax, and excise duties.


Despite the announcement of the tax hike in the fall, dealers on Monday remained confused about the increase.


"There is a new (tax) tomorrow, but we don't know what it is," said Riviere. "I have three different scenarios on my desk."


Dealers were certain, however, that the total tax would go up.


Valery Chusev, a writer for Avto Yezhenedelnik (Auto Weekly) said the announcement of the new tariffs last fall coincided with a price rise for Russian-made VAZ automobiles.


"The main reason for the tariffs is to protect the Russian auto industry," Chusev said. "Also our government is always looking for ways to line its pockets and, in as much as a car is a status symbol, they see it as an easy way to do this"


But Mark Thimmig, vice president of Trinity Motors, a Moscow General Motors distributor, said the new tariffs will do little to protect Russia's auto industry.


"The products that General Motors of North America imports appeal to buyers in Russia who are not interested in Ladas or other Russian-made cars" Thimmig said."Russian-made cars only compete with entry-level Japanese or Korean cars, which are less expensive than GM cars."


Thimmig and other dealers said the new tariffs will affect sales as well as the number of different models a dealer can keep on hand.


With common problems of high tariffs, confusing import regulations, and the difficulty of doing business in the ex-Soviet Union, the manufacturer's representatives and their dealers have been holding meetings and are preparing to organize an industry association.


"We are working to register it and legalize our position because we feel that we need to work together on official levels," said Ford's Yuroshkin. "Only now are we beginning to discuss lobbying the government."


Committees have been formed to address issues such as the high tariffs and problems with vehicle safety certification. Plans to lobby the Russian government to lower the import tariffs are also being considered.


But even if the Russian government goes ahead with the new tariffs and sales drop, none of the foreign automakers said they would pack up and leave.


Thimmig of Trinity Motors says he accepts the tariff as just part of doing business here -- although he plans to do everything he can to fight it.


"Doing business in Russia is a challenge -- and the new tariff is just another challenge. Without diminishing its importance, we have to accept it in a calm, businesslike manner."