InfoQuest (May 27, 2020) -- Mr. Pinyo Tanawatcharaporn, secretary-general of the Association of Used-Car Dealers, sent a letter to the Excise Department to oppose the proposal by the Federation of Thai Industries (FTI) to reduce the consumption tax on new cars by 50 percent in support of the auto industry hit by the COVID-19 pandemic. Mr. Pinyo called the proposal "highly inappropriate" and said it lacked "overall awareness and social responsibility" and would make situationforthe related industries even worse, just as the tax refund policy for first time car buyers launched in 2012 did.
The Association of Used-Car Dealers argued that if the government supports the proposal, it will inevitably have an impact on the value of second-hand cars in circulation in the industry, in addition to the 40,000-100,000 baht in tax losses per unit. Used-car dealers will suffer heavy losses as the value of their inventory plunges, as it did in 2012 when more than 30 percent of used-car dealers went bankrupt. This will add to the woes of used-car dealers who were already struggling during the crisis.
"The impact of the 'first-time car buyer program' on the used-car industry and the ecology of the auto credit industry lasted for three years, making it one of the most serious crises the used-car industry has suffered yet. The collapse in the value of cars has led to a sharp drop in the assets of the used-car industry and other related industries. For example, the car credit industry has suffered asset devaluation, which has wreaked havoc to the ecosystem,"Mr. Pinyo said.
As for the proposal to ask the government to back up the program to replace old cars with new ones, that is, to provide 100,000-baht subsidy for the old car with tax revenue, the proposal did not point out where the old car will be stored. Although many countries do support such programs, it is important to specify the age of the vehicle. For example, if a car has been used for more than 15 years, how much subsidy the government will offer to recycle it or export it to a third world country to address the pollution problem at home. At present, there are no clear requirements regarding programs for vehicle recycling or export to third world countries, so the Association of Used-Car Dealers said the government should mull assistance only after it receives a clear plan from the auto industry.
"I hope that the government can fully analyze the pros and cons of the FTI's claims in order to avoid making the situation of other industry operators struggling in the crisis worse," Mr. Pinyo said.
If the Exercise Department does lower the consumption tax on new cars, it will cause the used-car market to shrink by more than 20 percent this year from 145 billion baht a year earlier, which was already down by 25 percent in the first quarter of 2020 due to the pandemic and the tightening of credit due to rising household debts. Therefore, the Association of Used-Car Dealers hoped that the Exercise Department will not lower the consumption tax as proposed by the FTI.
Mr. Pachara Anantasilp, director-general of the Exercise Department, said that the complaint of the Association of Used-Car Dealers had been received and that those who proposed the reduction and those who opposed the proposal would be invited to a meeting in the Exercise Department on May 28. As for the final results, the department will issue a separate statement, and it must first listen to opinions of all sides.
Source: InfoQuest, by Phana / Tanawat / Rachada, translated by Xinhua Silk Road.
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