Mercedes Halts Imports Over Luxury Tax

The sole retailer of Mercedes-Benz cars into the country, Hung Hiep (Cambodia) Co., has suspended imports since January over what it claims is a new import duty on luxury cars coming into the country.

Other luxury car importers including Porsche, Audi, BMW and Jaguar Land Rover, say since the start of the year, following a memo to customs officers in December, the Finance Ministry’s customs department has added an additional 20 percent tax on new high-end cars, mostly from Europe.

Pily Wong, CEO of Hung Hiep Co., said that the additional cost of the new tax, which was not formally announced to car dealers, has forced him to halt imports to avoid having to put overpriced cars on the market.

“I have stopped importing cars at the moment due to this regulation,” Mr. Wong said.

Mr. Wong, who is also the vice president of the Cambodia Automotive Industry Federation (CAIF), said the federation has met with Commerce Minister Sun Chanthol in an effort to lobby the government to re-examine the tax increase.

“I am waiting to see the outcome of our discussions with the government,” he said.

The memo from the Customs and Excise Department, signed by Finance Minister Aun Porn Moniroth and dated December 24, outlines how import officials should determine the value of vehicles being imported into the country.

“For any brand new luxury vehicles such as BMW, Mercedes, Audi and other similar brands, the customs value is considered at least 20% higher than the customs tariff,” the memo states.

“For vehicles of Chinese brand and manufactured in China, considered customs value can be 60% less than value in the above tables,” it says, referring to the tables detailing the customs tariff for cars of a particular year and engine capacity.

Peter Brongers, CEO of BMW Cambodia, complained that the memo has given an unfair advantage to Chinese carmakers at a time when a number of Western luxury brands have just started entering the market.

“They are targeting the brands. Our cars have gone up significantly [in import costs], and this has affected sales and many other brands are not affected at all.”

Mr. Brongers said that basing a tariff on a brand rather than the model is allowing non-luxury brands with higher-end vehicles, such as Toyota’s Land Cruiser, to avoid paying a higher duty.

Toyota (Cambodia) Co Ltd. general manager Ly Bunhay said he has not seen any changes to the import taxes on his cars.

“We are not a luxury brand and don’t import luxury cars,” he said.

Peang Mann, CEO of Worldwide Garage, which imports Great Wall cars from China, speculated that the government is offering incentives to import Chinese cars as ties between the two countries strengthen.

Nonetheless, he said that Great Wall has struggled to gain a foothold in the car market here.

“Since arriving in 2010 we’ve been struggling to sell a lot of cars but the trade incentives the government is offering should make us more competitive,” he said, adding that the company has not seen a significant decline in import costs since the December memo.

Bou Bunnara, chief of the public relations unit at the General Department of Customs and Excise, said the customs memo has been misinterpreted and that the taxation system on imported vehicles hasn’t changed in 10 years.

He said that references in the memo to a higher customs value for certain brands is not meant as a tax hike, but as a guide for customs officials to properly value imported vehicles.

If a new luxury car is being imported, customs officials need to be aware that its declared value should be 20 percent higher than a car by a non-luxury brand, Mr. Bunnara said. If the declared price on the car is undervalued, officials have the authority to impose the appropriate tax, he added.

“The car companies don’t know [about customs taxation],” Mr. Bunnara said. “They sometimes increase the price to cheat people and then blame customs.”

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