Car imports come under scrutiny

Sep 14, 2007
Car imports come under scrutiny
Two traders arrested as Customs looks into importers underdeclaring value of vehicles
By Christopher Tan
THE buzz of wheeling and dealing at the Automobile Megamart in Kampong Ubi was interrupted on Tuesday morning when officers from Singapore Customs arrested two motor traders.

Ng Chee Siang, 24, and Chua Wee Meng, 37, were charged in court on Wednesday for trying to recover documents seized by Customs for an investigation.

If convicted, the duo face a maximum penalty of a $10,000 fine and 18 months in jail.

The alleged offences took place in June, at 61 Ubi Ave 2, unit #07-05 - which is also the office of a top parallel importer here. The company would not comment yesterday.

The Straits Times understands that the arrests are part of a crackdown on car importers suspected of underdeclaring the value of their cars, a widespread practice estimated to cost the Government millions in taxes every year.

A Customs spokesman confirmed that its officers were carrying out audits on car importers, but declined to say more as investigations are ongoing.

The Straits Times reported in June that the difference between the declared values of parallel imports and comparable cars brought in by authorised agents has widened in recent years.

The difference in taxes they attract can be more than $10,000 per car - thus allowing parallel imports to be priced far more competitively.

Parallel imports now account for 27 per cent of the new car market, up from less than 5 per cent in the 1990s, when the market was liberalised to facilitate such imports.

The crackdown is already having an impact, say industry sources. They have seen the open-market value (OMV) of several popular parallel imports adjusted upwards in recent weeks.

The OMV is roughly the cost price of a car plus the cost of transporting it to Singapore. It is the base rate on which all vehicle taxes are applied.

'There were some revisions,' a Singapore Vehicle Traders Association committee member noted.

Traders have started to advertise higher OMVs for some models. This has resulted in a wider-than-normal range of prices in the showrooms of parallel importers.

For instance, the hot-selling Toyota Wish XE goes for between $72,000 and $75,000, while the Toyota Estima X ranges from $99,000 to $108,000. The Toyota Harrier is now priced between $106,000 and $101,000.

Singapore Customs said the two arrests were the first made this year. Between 2004 and last year, it took four cases to court and collected $1.23 million in fines. Another 25 cases were settled out of court when importers paid composition fines of $3.2 million.

The fines collected pale in comparison to those for similar cases in the 1990s, when Customs and the Land Transport Authority recovered tens of millions of dollars, mainly from authorised agents.

'Motor traders have become a lot smarter. They don't leave incriminating evidence like memos and e-mail around,' said an industry expert.

Many of them set up companies in Japan or Britain which act as exporters, selling them cars and allowing them to quote prices that are far below factory ones, he explained.

'The burden of proof is on Customs...to produce evidence of a trader suppressing the value of a vehicle,' he said.

Observers reckon fundamental changes are needed if the problem is to be licked.

'We should apply taxes at the point of sale, based on the retail price of the vehicle,' suggested Mr Cecil Leong, managing director of Customs consulting firm Bryan Cave International Trade.

christan@sph.com.sg