A three-year tax policy nightmare for vehicle importers takes a turn for the worst as the Ethiopian Customs Commission readies to auction off hundreds of cars seized over hotly-disputed tax violations.
A number of importers and Ethiopian Diaspora returnees have seen close to 300 freshly-imported vehicles languish in compounds operated by the Commission in Addis Ababa and Adama for the last few years, on the grounds they had failed to pay the excise taxes introduced in early 2020.
In February 2020, Parliament ratified an excise tax proclamation tabled by the Ministry of Finance, implementing a new excise tax regime for vehicle imports.
Although the proclamation provided a six-month grace period for importers already in the process of shipping vehicles, many were unable to meet the deadline due to transportation restrictions resulting from the COVID-19 pandemic.
Importers had until August 2020 to ship in their vehicles and clear them with the Customs Commission if they wanted to avoid the new, very high excise taxes – in some cases up to 400 percent of the vehicle’s value.
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However, a dozen importers and close to 50 returnees, altogether shipping in more than 300 vehicles valued at more than half a billion birr, missed the deadline owing to transportation hurdles. The Customs Commission demanded the importers pay the new excise tax despite most of the vehicles being delivered within a few days of the deadline, according to importers.
“Immediately, the following morning, they began demanding we pay the excise tax,” said an importer who did not manage to get all of his vehicles into the country before the deadline.
The predicament caused an uproar among importers, who had been petitioning all concerned government bodies for a solution.
“We voiced our concerns to the Customs Commission and other offices that our cars would be late due to the transportation issues way before the deadline,” an importer who has seen more than 20 vehicles impounded told The Reporter.
Nonetheless, the deadline passed and the Commission directed all appeals to the Ministry of Finance. Officials there were also at a loss. Determined, the importers took the matter to even more senior officials.
“We once went straight to the Office of the Prime Minister and happened to run into Prime Minister Abiy Ahmed,” an importer told The Reporter.
The PM reportedly delegated the matter to GirmaBirru, his chief economic advisor, who discussed the issue with officials at the Customs Commission and the Finance Ministry but did not manage to present the importers with a solution.
To make matters worse, the importers were incensed to discover that the Customs Commission had auctioned off no less than 23 of the vehicles while they were busy with their appeals. A further 37 vehicles had been transferred to various government offices.
In April 2023, Minister of Finance Ahmed Shide penned a letter to the Council of Ministers, proposing a solution on behalf of the importers.
The Minister requested that the Council approve the use of part of the 23.6 million birr raised from the auction of 23 vehicles to pay off the outstanding excise tax on the remaining vehicles (at pre-proclamation rates). He also suggested the importers receive another 22 million birr for the vehicles transferred to government offices.
The Reporter was unable to determine the Council’s response to the proposal.
Meanwhile, the Customs Commission is readying to auction off the rest of the impounded vehicles.
“The Commission took legal action in accordance with its legal mandate,” Customs Commissioner Debele Kabeta told The Reporter. “I affirm we will take serious legal action against those who illegally propagate and interrupt the legal actions we have taken.”
The Commission’s Addis Ababa Kality Branch Office recently announced it would auction off 46vehicles on November 30, 2023, with initial bidding prices ranging from half a million to 13 million birr.
Another bid document obtained by The Reportr reveals the Commission’s Adama Branch Office will be auctioning off a further 165 vehicles on November 28, 2023.
It is not the first time the Commission is attempting to sell off the cars. Importers told The Reporter there have been at least five occasions in the last three years when they were forced to plead with elders in Adama as well as Finance Ministry officials to step in and prevent an auction.
“This time, we couldn’t do anything to stop the auction,” a member of the Ethio Vehicle Importers’ Association told The Reporter. “We don’t know whether we will get a portion of the funds raised from the sale of the vehicles.”
The Commission’s bylaws prohibit the importers from taking part in the auctions.
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