(DNE File Photo)
By Ahmed Amer
The transportation division at the Federation of Egyptian Industries (FEI) and the Industrial Development Authority (IDA) have presented two proposals for an automotive industry strategy to the Ministry of Trade and Industry.
Currently, the Ministry of Finance is studying the proposal and determining the tax system for the automotive sector.
The transportation division made some amendments on the proposal given by the IDA, as per car manufacturers’ demands. The authority’s strategy was sent to the ministry without consulting manufacturers, which pushed the division to present it to manufacturers and amend some points before sending it to the ministry.
The amendments stipulated the customs tariff be raised to 20% instead of 10% on imported cars, except for the European Union (EU), Turkey, and the Agadir Agreement member states.
The division demanded the cancellation of the sales tax on local products, instead of the authority’s suggestion to put alternatives as compensation for the additional tax proposed by the IDA.
The division recommended that an additional tax of 30% be imposed on imported cars with a capacity of less than 1.6 litres, 40% on cars with a capacity between 1.6 litres and 2 litres, and 50% on cars with a capacity of more than 2 litres.
As per the proposal, the total customs on imported cars, except for the EU, Turkey, and the member states of the Agadir Agreement, are: 74% for cars with a capacity of less than 1.6 litres; 106% on cars with a capacity between 1.6 litres and 2 litres; and 142% on cars with a capacity of more than 2 litres.
On the other hand, the total tax on cars imported from the EU and Turkey is: at 38% for cars with a capacity of 1.6 litres; 75% for cars with a capacity between 1.6 litres and 2 litres; and 104% for cars with a capacity of more than 2 litres.
The division made three suggestions on alternatives for cancelling the tax on the local product, through deepening the local manufacturing via increasing the local components gradually within five years. The second alternative is through subsidising investment in the quantitative production through raising the amount of production within the time period set for the programme. The third suggestion was to increase the export rate. The division proposed that $0.5 be discounted on the tax burden borne by the manufacturer for each dollar gained from export.
The IDA demanded the imposition of a customs tariff of 10% on imported cars from the EU, Turkey, and the Agadir Agreement member states. In return, all imported cars from the EU and Turkey would be exempt from customs by 2019, according to the EU-Egypt Association Agreement.
The proposal states that the sales tax would be increased by 15% for cars with a capacity of up to 1.6 litres, 30% for cars with a capacity between 1.6 litres and 2 litres, and 45% for cars with a capacity of more than 2 litres.
The authority recommended imposing an additional tax on imported cars, with 30% for cars with capacity of up to 1.6 litres, 40% for cars with a capacity between 1.6 litres and 2 litres, and 50% for cars with a capacity of more than 2 litres.
Meanwhile, the IDA’s recommendations were that the total tax on cars imported from the world except for except for the EU, Turkey, and the Agadir Agreement member states, is at 64% for cars whose litre capacity is up to 1.6 litres, 96% for cars whose litre capacity is between 1.6 litres and 2 litres, and 132% for cars whose litre capacity is more than 2 litres.
On the other hand, the recommended tax on cars imported from EU and Turkey is at 48% for cars whose litre capacity is up to 1.6 litres, 75% for cars whose litre capacity is between 1.6 litres and 2 litres, and 104% for cars whose litre capacity is more than 2 litres.
The IDA affirmed that the manufacturing companies are not subjected to any additional demands for the local components once they fulfil the plan for production increase. The authority also suggested increasing exports.
