Sales of imported car have dropped sharply since the government imposed a tax hike on the imports, the Anatolian News Agency said last week.
The value added tax (VAT) on cars with engine capacities between 1,601-2,000 cc went up to 40 percent from 25 percent just a week ago. The government's move is designed to restraining domestic demand for that type of cars, which it views as partially responsible for the bulging trade deficit.
The cars are imported because local industry produces small quantities of engines above 1,600 cc. Car importers and local dealers told the Anatolian News Agency that the move would have an insignificant, if any benefit to the domestic industry. Earlier, the government raised the tax on consumer loans in an attempt to control soaring demand for consumption durables including cars. The move was followed by measures from banks to increase loan
"Demand for 1,601-2,000 cc cars has contracted significantly since the VAT rise," said Birol Ergen, sales director for Gen-Oto, the Bursa-based dealer of Volkswagen, Audi and Seat cars. "Even 2,000 cc drivers are opting for 1,600 cc and some orders have been canceled. Increasing taxes is not how you help the economy," He said.
Sales have slumped by 80 percent since the VAT increase according to Mehmet Araz, sales director for Opel retailer Yuce Hunkar. "Previously, buyers were queuing up for cars above 1,600 cc, now lines are disappearing. Orders for some models are being canceled. Fortunately clients who give up on those cars are choosing to buy 1,600 cc Opel models. Still the strong demand has ebbed away," Araz said.
Tofas dealer Bursa Oto A.S. general director Ahmet Fisek agreed somewhat that the government decision would boost local car sales. "The state is doing its best to put the brakes on demand but it is not understandable. The sector is already facing a heavy tax burden. The currently strong demand is the pent-up demand of the past five years. This decision is wrong," Fisek commented. –(Albawaba-MEBG)
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