For the past few weeks, the Nigerian maritime industry has been embroiled in controversy following the introduction of a 15% National Automotive Council levy by the Nigeria Customs Service. ANOZIE EGOLE examines the implications of this policy in the automotive industry
When the leadership of the Nigeria Customs Service in April 2022 proposed the introduction of an additional cost of 15% on the already high cost of clearing imported vehicles under the guise of the National Automobile Council levy , she did not envision that politics would lead to upheaval and controversy.
Although the Service stated that the directive originated with the Federal Department of Finance and that it was merely implementing it, the directive could best be described as a victim of circumstances arising when clearing agents operating in the The country’s ports were already strained with the introduction of vehicle identification number for the assessment of imported vehicles.
VIN Appraisal on Imported Used Vehicles, an artificial intelligence manual that drives documentation processes in an electronically digitized format, was a child of necessity. The services said they had corrected the discrepancies between the duties to be paid on vehicles of the same manufacturer, the same year and the same model.
While the VIN was still the subject of controversy, leading to the eventual suspension of the platform for 30 days, the NCS at the beginning of last month revised the duty on imported used cars from 35% to 20%, which which complied with the Economic Community of West African States Common External Tariff Directive.
The Service, being unhappy with the ECOWAS directive on duties, went further by introducing the 15% NAC levy, which enabled the Service to recover the 15% of the old import duty on imported second-hand vehicles by reducing the duty due on imported vehicles to 35% than before the ECOWAS directive.
Imported used vehicles will still have to pay 20% import duty plus 15% NAC levy, i.e. 35%.
An NCS spokesperson, Timi Bomodi, had said in a statement that the new tariff was in line with the adjustments stipulated in the protocol of the Common External Tariff of the Economic Community of West African States, of which Nigeria is signatory.
The statement read: “On Friday, April 1, 2022, the Nigeria Customs Service moved from the ECOWAS Common External Tariff, 2017-2021 to the new version, 2022-2026. This is in line with the World Customs Organization’s five-year review. of nomenclature. Contracting parties are expected to adopt the revision based on regional considerations and national economic policy.
“The country has adopted all tariff lines with few adjustments in the existing CET. As permitted by Annex II of the 2022-2026 edition of the TEC, and in accordance with the finance law and national automobile policy, the NCS has retained a rate of duty of 20% for used vehicles such as forwarded by ECOWAS with an NAC levy of 15%. New vehicles will also pay a 20% duty with a 20% NAC levy, as stated in Federal Ministry of Finance letter Ref. N° HMF BNP/NCS/CET/4/2022 of April 7, 2022.”
“It is instructive to note that the national tax policy on the importation of motor vehicles and other items is aimed at developing the local economy in these sectors. The NCS focuses on the implementation of these policies in the hope that it achieves the desired goals in accordance with the National Motor Policy and other government fiscal policies.
“Under Chapter 98 of the current TEC, Bonafide assemblers who import fully disassembled CKDs and semi-disassembled SKDs enjoy a duty rate concession of 0% and 10% respectively. Within ECOWAS, the duty rate for the same items is 5% and 10%, respectively. Encouraging their efforts through political interventions guarantees a win-win situation for the nation in the long run. Implementation of the current TEC takes effect immediately, please.
Nigerians believed that the introduction of the 15% NAC tax was illegal and contravened financial acts. They said the essence of the NAC tax, which was 2% when it was introduced, was to stimulate domestic auto manufacturing, even though it fell short of the tax’s purpose.
A former National Automobile Commission committee member, Lucky Amiwero, has slammed the controversial 15% tax levied on imported vehicles by the Nigeria Customs Service as illegal, saying it breaches the Finance Act from the country.
“Well, the question on that is still unclear, because what the law says is that the 15% is on the NAC. And on the NAC law, I was a member of the committee meeting that overturned the NAC, and it’s only 2% for the NAC law.
“So bringing the NAC to 15% is illegal. It’s not legal. The entire policy is not very clear and makes no sense when looking at the entire policy. The circular, which the Minister published in March, provides this clarification. The one that Customs signed, which they referred to as migration, is simply the passage of the Harmonized System code from the World Customs Organization. And when you migrate, you drop a lot of items that are no longer useful for trade around the world. »
Amiwero said the NAC law passed in 2014 contained only a 2% collection for insurance.
“The NAC, the National Automotive Design and Development Council, Act was passed in 2014. Under the financial provision, we have a 2% collection of insurance costs, so if you report 15%, you’re breaking NAC law.
He also indicated that the 2001 and 2020 finance laws said nothing about the 15% levy.
“The finance laws of 2001, 2020 did not contain all these things that they cited. The Acts contain only questions of reduction. It does not contain a sample. Both Acts did not contain these things; the 2020 finance law does not, so where did they find that one? So that one must have been incorporated by them.
The 2020 finance law includes provisions to reduce vehicles, and there is no levy on the finance law. There is no levy of 20 or 15%, so they should take it to the National Assembly, and in the finance law of 2021, there is nothing like the levy,” he said. -he declares.
The president of the Lagos branch of the Automobile Dealers Association of Nigeria, Metche Nnadiekwe, lamented that the government failed to involve members of the association as stakeholders before making such decisions.
“Some people are stakeholders in some companies, and when you want to put in place certain policies, why don’t you consider them? Can’t you even talk to them about how these people are going to be affected? So it seems like a calculated attempt to deal with some people. We don’t know what’s going on here and remember, wherever there is this stuff, it’s the Nigerians who will suffer.
A maritime barrister and senior lawyer in Nigeria, Jean-Chiazor Anishere, said the introduction of the tax was wrong, adding that a court order should restrict the imposition.
Maritime industry experts have raised concerns that the country should expect an increase in vehicle smuggling with the introduction of the controversial 15% tax on imported vehicles coupled with the recent reopening of borders.
A member of the National Association of Government Licensed Freight Forwarders, Nnadi Ugochukwu, says the 15% levy implies he is impoverishing Nigerians.
He also asked where the 2% NAC levy collected earlier was.
“For a long time, the government charged 2% NAC on imported vehicles. He says the money will be used to encourage local vehicle manufacturing. So where is the money collected over all these years, what was done with the money and what was it used for? Now they’ve brought the 15% back on new vehicles, making them pay 20% instead of the 5% they used to pay. You can see that homework is now unbearable. The implication is that it impoverishes Nigerians,” he said.
Furthermore, a member of the Association of Nigerian Licensed Customs Officers, Akintoye Ojo, laments that the implications are massive for the transport sector.
“The cars will be very expensive and ordinary mortals will not be able to afford them. Prices are going to go up, and like it or not, it will affect the transportation industry because transportation rates are going to go up. An ordinary person will not be able to afford a car. Owning a car is not a problem if you have a good transport system where everything works properly. Even if you don’t have a car, there are countries that no one will notice.
However, Nnadiekwe also says the introduction of a 15% NAC levy will increase car prices in shops. The group at one point threatened to close stores if the issues were not properly addressed.
Teju Somorin, Professor of Taxation and former President of Nigeria’s Chartered Institute of Taxation, said: “Transport prices can rise. Uber and Bolt who use imported vehicles for their businesses may have to raise their rates. »
She says the tax can lead to the high cost of imported vehicles.
A trader, Harrison Ike, said: “Buying cars now is a very big task. It took me a long time to get one, even though it’s a family-use Toyota Corolla, but the more I try to save up for it, the more it costs. I’m tired of all this.
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