Having to pay only 20 percent in value added tax, some 19,153 cars were cleared through customs in Oct-Dec. 2011 compared to only 3,965 in the final quarter of 2010
By Ervin Lisaku
TIRANA, April 9 – Albania saw an unprecedented increase in car imports in the final quarter of 2011 when customs duties were lifted, significantly lowering their prices and a new law on annual taxes discouraging the use of old cars entered into force. Latest data published by the country’s Institute of Statistics, INSTAT, show more than 19,000 cars, mostly second-hand ones, were imported during the final quarter of 2011, almost five times as many compared to the same period in 2010, when the customs duties burden and complicated sales procedures had almost paralyzed the market.
Having to pay only 20 percent in value added tax, some 19,153 cars were cleared through customs in Oct-Dec. 2011 compared to only 3,965 in the final quarter of 2010. Fuelled by the new law effective from Sept. 2011, car imports in 2011 doubled to 32,600 compared to 2010.
While the new law lifting customs duties cut second-hand car prices by at least 30 percent, Albanians increased purchases for cars produced in the past 5 to 10 years, also because of the new tax system considerably increasing annual fees for older motor vehicles.
Since mid-2010, when a law raising taxes on the sale of used cars took effect, the sale of cars under legal contracts had declined as car owners began resorting to authorization or donation practices to sell their cars. However, in late Sept. 2011, a new law unblocked the sales of second-hand cars whose transactions had dropped by 25 percent during the first eight months of 2011.
The removal of customs duties was accompanied with a new taxation system based on cars’ age, the engine capacity and the kind of fuel they use.
The new law excludes cars produced during the past three years from their annual taxes but applies a progressive coefficient of 0.18 for cars produced in 2009 and a +0.01 coefficient for each year before. The tax is calculated by multiplying the car’s engine capacity (cc), with a progressive coefficient starting at 0.18 and a fixed tariff of 25 Lek for diesel cars and 20 lek for petrol ones. The new formula increased taxes for cars older than 10 years and kept annual taxes for newer cars at the same or slightly lower levels.
Government’s losses from customs fees were replaced by an extra tax imposed on fuel initially at Lek 5 lek/litre which has also contributed to staggering oil prices, currently at a record 200 lek/litre (Euro 1.4). As of Jan. 1 this year, Albanian car owners are being taxed 7 lek/litre of oil compared to 5 lek from Sept. 2011 to Dec. 2011 when car customs taxes, circulation and registration taxes were lifted as failed to be replaced by a new fixed tax based on oil consumption.
