Car imports slow down after boom in late 2011

TIRANA, Jan. 8 – After a sharp increase in late 2011 following legal changes lifting customs duties, car imports slowed down in the first three quarters of 2012 when they rose by only 7 percent, according to data published by state Institute of Statistics, INSTAT. Data show some 30,386 cars, mostly second-hand ones, were cleared through customs in the first nine months of the year, compared to 28,391 during the same period in 2011. 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, a record 23,503 cars were imported, six times more compared to the final quarter of the previous year.
Having to pay only 20 percent in value added tax, some 51,894 cars were imported in 2011, more than treble 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 2012, 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.
Data published by the Open Data research centre show the total number of motor vehicles in Albania rose to 420,000 in 2010. The number of cars per 1,000 inhabitants stands at 121, lagging behind regional Bosnia and Herzegovina, Macedonia and Serbia with 135, 144 and 227 cars per 1,000 inhabitants respectively.