Grey vehicle imports cost fiscus R5bn to 8bn a year in direct taxes

Grey used vehicle imports are costing the fiscus between R5 billion and R8 billion a year in direct taxes, excluding income taxes, according to automotive business council Naamsa.

“This is a massive number,” said Gary Scott, the Naamsa vice president for retailing for original equipment manufacturers (OEMs), on Tuesday at a SA Auto Week event.

“It excludes grey imports that are parading as South African cars that have been naturalised on the Natis system through nefarious means.

“That is a problem as well,” he said.

Scott said new vehicle sales to the Southern Africa Customs Union (Sacu) have declined by 23% in the last five years, while new vehicle sales in South Africa declined by 18% in the same period.

There are a number of reasons for this, but the biggest is grey imports, he said.

‘Jaw-dropping numbers’

“It’s actually jaw-dropping numbers. It involves organised syndicates.”

Scott said South Africa has strict control measures that should ensure only a limited number of legal used vehicle import permits are issued.

The exceptions to these strict rules are for immigrants, the cars of returning South African residents, specifically adapted vehicles for persons with physical disabilities, vehicles that have been inherited by South African citizens, vintage and collector passenger vehicles and racing cars.

He said customs does not issue more than 20 000 used vehicle import permits a year.

As many as 500 000 of the about 11 million vehicles on South Africa’s roads are possibly “problematic cars,” Scott says.

Even if it is assumed that all of the foreign number plates on these vehicles are legitimate and registered on a database of a neighbouring country, 440 000 of these vehicles have been in South Africa for longer than 12 months, which is not permitted, he said.

Scott added that 220 000 of these cars have never crossed the border. “These are cars that have come into the country through our ports in Durban and are destined for foreign countries but never get there.

“This is what I call the 13th cheque for our industry, because this represents at least one extra month’s sales of new vehicles being displaced in this country.”

Control issues

Naamsa acting president Andrew Kirby said the grey vehicle imports problem is largely caused by a control issue.

Kirby said a mechanism was in place at the ports where the SA Revenue Service (Sars) and the National Regulator for Compulsory Specifications (NRCS) curtailed any illegal activity.

“To a large degree those control measures have basically fallen away. I can’t say why. I think it’s largely a management issue, like all things,” he said.

Kirby said Toyota has done a lot of analysis on Toyota foreign registered vehicles and provided NRCS and Sars with documented evidence.

Naamsa has also been engaging with the NRCS to try to find a way in which various protocols are put in place, but has not yet received a response.

“But the South African public need to be aware that these illegal grey imports can be confiscated and that they are aiding crime,” he said.

Scott said the Department of Transport believes it should own the solution to this grey vehicle import problem, but stressed the Road Traffic Management Corporation (RTMC) cannot solve the problem by itself.

“Our frustration is that this solution is not without merit but it lacks a timeline and a clear resource,” he said.

ALSO READ: R3 billion worth of fake vehicle licence discs issued by Post Office

The plan

Scott added that Naamsa and a structure comprising the SA Police Services (SAPS), Sars/Customs, Treasury, NRCS, the International Trade Administration Commission (Itac) and a number of other government stakeholders are trying to develop a coordinated plan.

A consolidated plan has been developed over the past 18 months and will apparently be workshopped in December this year.

“The idea is that once that plan is workshopped and signed off, it goes to each of the stakeholders to get signed off and then becomes a public private partnership (PPP),” he said.

Scott said Naamsa can provide information “on a plate today” to the authorities about the location of 100 000 of the 440 000 grey vehicles and “where they will be tomorrow”.

This is because these cars are used at very predictable times to drop children off a school, to get to work or to a shopping centre. However, Scott said the SAPS need a customs official to accompany them to impound these vehicles.

If these vehicles cannot be effectively held and “walk the whole justice chain to actually crush the car, you are wasting your time”, he said.

Scott said the automotive industry has made three recommendations to Minister of Transport Fikile Mbalula, which “with the stroke of a pen” would significantly impact grey vehicle imports.

These were to:

• Ban the import of grey tyres, which are imported with the intention of them being retreaded.
• Close the Ro-Ro (Roll on, Roll off) used car terminal in Durban.
• Stop the sub-leasing of grey vehicle imports from bond stores in Durban to Pakistani and UAE nationals, who sell them through websites to South African consumers.

Scott said retreading a used tyre is more expensive than a new tyre, which means these used tyres are not being retreaded but fitted to vehicles, which is a massive road safety issue.

“It’s also opening up a criminal channel and then grey cars can come through the same channel. They [this channel] have already started importing grey cars,” he said.

Scott said Portnet has asked Naamsa if it will support the ports authority in an application to close the used car terminal, resulting in Naamsa writing to the minister and urging him to close it.

He said South Africa is obliged in terms of the World Trade Organisation (WTO) rules to allow free transit of vehicles through ports to neighbouring land-locked countries – but added: “you don’t have to make it easy”.

Scott said the Ro-Ro terminal allows the cars to be driven under their own steam and they “leak” into the local market.

“Killing the used car terminal forces the cars to come into the country in containers, which are much more traceable,” he said.

Mbalula said during a briefing on the outcome of a Special Investigating Unit (SIU) investigation into various vehicle licencing and registration problems this week, that R52.59 million in cash was recovered through the seizure of 375 illegally imported vehicles during joint operations with the RTMC, Hawks, Sars and SIU in Eastern Cape.

This article originally appeared on Moneyweb and was republished with permission.
Read the original article here.