Today, May 30, the Verkhovna Rada registered a draft law that proposes to cancel most of the benefits for the import of goods that have been in effect since the beginning of April. The document also provides for the cancellation of "zero" customs clearance. The Auto Market Research Institute analyzed the chances of adoption and outlined possible time frames for changes.
What does the draft law provide for?
The text of the document is very simple — it proposes to simply exclude those provisions of the laws that made it possible to import goods without paying customs fees. Including vehicles, without any clarifications or exclusions. If the law is adopted, customs clearance will be as it was before — with the payment of duty, VAT and the current formula for calculating the excise tax, which depends on the age of the car and is contrary to European legislation.
The initiator of the changes is the Cabinet of Ministers of Ukraine, and the explanatory note states that the reason is budget losses. As if the state treasury did not receive 13 billion hryvnias, which Ukrainians saved during the registration of 119 thousand cars, which were brought during the period of "zero" customs clearance.
However, it is incorrect to calculate losses in such a linear way, experts note. After all, such a number of cars of these brands and models were brought thanks to the action of "zero" customs clearance. If there were no benefits, then the volumes of imports would be much smaller, and therefore the "losses" of the budget would not be of such a size. And if we take into account the potential benefit from the activation of related areas and the growth of economic activity of citizens, then it is not known whether there are general losses of the economy at all.
It is interesting that the explanatory note mentions "rare cases of import of premium class cars", although according to statistics, the absolute majority of cars were worth up to $5 thousand, and only 44 cars worth more than $100 thousand were imported as of the end of May.
As a "bonus", the draft law proposes to cancel the payment to the Pension Fund during the first registration of electric cars. Considering that 60% of sales in Ukraine are cars worth up to $8,000, the number of offers to sell electric cars for such money is critically small, and most of such cars cannot fully replace a classic car due to their low operational characteristics, for most Ukrainians such a benefit will not provide any benefits
When can "zero" customs clearance be canceled?
The publication of the draft law is only the introduction of the document for consideration by the Peopleʼs Deputies. In order for it to become a law, it is necessary to comply with the regulations:
- Conduct discussions and obtain conclusions of specialized committees;
- Take the document to the hall for voting and approve. If voting takes place in two readings, then after approval in the first, the draft law is sent for additional discussion in specialized committees and is re-submitted to the hall for voting as a whole;
- The document must be signed by the chairman of the Verkhovna Rada;
- The document must be signed by the President of Ukraine;
- The document must be published in the official press.
And only after that, the changes will begin to take effect. As practice shows, all these procedures usually last at least several weeks. Of course, there are cases of adoption of draft laws in a shortened procedure, when everything is organized in a matter of days. However, in this case, experts of the Institute of Car Market Research consider one to several weeks to be the most likely forecast. The probability of the adoption of the document is considered high, since the initiator is no longer individual peopleʼs deputies, but the Cabinet of Ministers of Ukraine.
In any case, "zero" customs clearance will be valid until July 1, 2022, because this is the date determined by the legislators.
How the cancellation of "zero" customs clearance will affect the car market
First, even before the adoption of the law, the market will be affected by the very news of the possible cancellation of "zero" customs clearance. This will reactivate those who hesitated in the feasibility of buying a car abroad, or expected that he would have another three months to calmly choose and deliver the car. Since the time frame is now again unclear, queues at the borders should be expected to grow. Especially active now will be those who want to clear the car with "zero" customs clearance, and sell it at the full market price after the cancellation.
Secondly, the return to the previous rates of customs payments will slow down imports and reduce their volumes and quantity. Bringing affordable cars, which are most needed by Ukrainians, will be economically unprofitable due to the amount of excise tax, which will often turn out to be greater than the cost of the car itself. This will slow down activity on the domestic car market.
Thirdly, prices on the market, which began to decrease in the market as a result of its gradual saturation with cars imported from abroad, will begin to rise again. Which, against the background of the already low purchasing power of Ukrainians, which decreased even more as a result of the war, will make buying a car even more unaffordable. This, in turn, will contribute to the aging of the car fleet, forcing Ukrainians to buy old cars on the domestic market instead of "importing" them from abroad for the same price.
According to the experts of the Institute of Car Market Research, the tax system for the import of used cars needs a comprehensive reform. Having analyzed the problems in the car market for ways to solve them, a balanced and compromise solution would be to cancel the excise tax on all types of vehicles as a rudiment that does not correspond to EU practice. As well as simplification of procedures and automation of processes during import.
