The Association of 16 car concessionaires operating in Albania says the import of new cars has dropped by 60 percent since changes to the national taxes made import of second-hand cars cheaper and easier in July 2011
TIRANA, Nov. 12 – Car concessionaires operating in Albania have warned they are on the brink of bankruptcy with their sales having sharply fallen since a new law lifting customs duties on second-hand cars entered into force a couple of years ago. In an open letter to Economy Minister Arben Ahmetaj, the Association of 16 car concessionaires operating in Albania says the import of new cars has dropped by 60 percent since changes to the national taxes made import of second-hand cars cheaper and easier in July 2011. Car concessionaires say they used to import 4,000 to 6,000 new cars each year but changes to the law in 2011 have sharply cut their sales and trebled import of second-hand cars, causing considerable damage to companies trading new cars.
“Currently, some 50,000 second-hand cars a year are imported to Albania each year, most of which are not allowed to be used or resold in their countries of origin,” says the Association. Some 16 concessionaires operate in Albania with 100 showrooms and employing around 2,000 people. They are estimated to have invested Euro 600 million in Albania.
“Because of the implementation of the law, all these companies are on the verge of bankruptcy but they are not declaring bankruptcy only because of the huge investments they have made and hopeful that the government will change this situation with legal changes,” says the Association.
A study carried out by the Association of Albanian concessionaires shows that 95 percent of cars traded in Albania are second-hand ones, and do not pay taxes especially VAT.
The Association demands from government to ban import of second-hand cars used for more than five years, a measure which they say would increase sales of new cars to 20,000 in 2015. The state budget would benefit Euro 35 million in VAT and Euro 15 million in profit tax and insurance, a total of Euro 50 million, only in 2015.
Car concessionaires demand the reintroduction of import tax and the fiscal discipline of the second-hand car sale market which does not apply VAT.
However, in a meeting with concessionaires at the parliamentary trade, even MPs at the parliamentary trade committee said they could not afford buying brand new cars.
Car imports
After sluggish imports in the first three quarters of 2012, car imports, mostly second-hand ones, in the final quarter of 2012 saw a boom. Some 26,113 cars, worth 5.5 billion lek, were imported in the final quarter of 2012, taking the total number of imported cars during the whole of 2012 to 56,499 cars, up 8.8 percent compared to 2011, according to INSTAT.
In the final quarter of 2011, when customs duties were lifted significantly lowering car 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.
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. Car taxes which since September 2011 have seen a sharp rise for second-hand cars more than 10 years old were halved in a move taken just two months ahead of next June’s general elections.
