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Elimination of Customs Duties on European Cars not to Lower Prices in the Market

As reported, after the entry into force of the Association Agreement between Georgia and the EU on September 1, goods from the EU, in particular, cars can be imported into the country without paying customs duties.

According to the Revenue Service, in January-August 2014 taxes on   imported cars amounted to GEL  116 million, of which 26.3% fall on  customs duties (30.4 million), the remaining 73.7% – on excise.

Taxes on cars imported from Europe amounted to GEL 47.4 million that is  40.9% of the total amount of taxes. Of these 19.15 million (40.3%)  fall on customs duty and 59.7% (28.3 million) – on excise.

According to the Revenue Service, this information is reliable at 95%, as all imported cars are accounted by patrol police, who in turn provides all the information to the Ministry of Finance.

Director of the importing company “Renault – Nissan” Irakli Barkaya notes that overall import duties are set in dependence on the engine cubic capacity, and benefits relate to vehicles produced in Europe.

“For example, the customs duty on the car with engine cubic capacity of 1.5 cubic meters is GEL 65,  2.0 – GEL 120, etc. In general, prices for small cars will fall by USD  50-100 per vehicle. This is certainly good, when selling  200-400 cars with small engine a quite noticeable savings are received. At the same time we must understand that it will not  affect the overall state of the market, as the customs duty rate occupies a very small share  of the total cost of the car, “- says the businessman.

In his opinion, savings will be more significant in the premium class – GEL 500-600 per one car, although it is not a critical level.

“Even this amount is not really significant when  the car is worth tens of thousands of dollars. The savings are more profitable for  dealers who will be able to reduce their costs, “- Irakli Barkaia adds. According to the commercial director of “Aka – Mercedes” Lasha Lomidze, the abolition of customs duties practically will not affect the price of their vehicles, as percentage of the fees is  very low.

“In general, it’s  good that fees are abolished, but I cannot say that it will  somehow affect our sales. In our shop the minimum value of the car is 21 000 Euro, the average – 60-70 thousand. The engine cubic capacity is  1.6 – 5.5 cubic meters. Thus, this innovation will not bring any significant changes in the pricing policy. In general, some small changes can be observed only on the used car market, where USD 50-100 more or less means something,”- Lasha Lomidze notes.