In Ukraine they want to make the trade in used cars more civilized. It is assumed that such cars will be sold through car dealerships, which, in turn, will have to pay taxes on the relevant sales.
The market will double
The Verkhovna Rada adopted in the first reading bill No. 9083, the purpose of which is to make it easier for specialized enterprises to trade in used cars. The essence of the document is that it will allow such enterprises to purchase cars not as vehicles, but as goods to be sold, and this should simplify the bureaucratic procedures associated with such transactions.
“Today, a car dealership can only buy a car as a vehicle,” explained Oleg Nazarenko, head of the All-Ukrainian Association of Auto Importers and Dealers, in a commentary for Apostrophe. — This entails the obligation to register it with the TCC, as well as with the main service center of the Ministry of Internal Affairs. And then, when there is a buyer for the car, you need to deregister it again and register it to the new owner.”
According to the expert, all these bureaucratic procedures are quite burdensome, require time and cost money. And therefore, almost all enterprises that resell cars do not officially buy cars, but use “schemes” to avoid unnecessary hassle. Basically, they take from the seller a general power of attorney for a car, which gives the right to sell the car on behalf of the owner, or buy it in the name of an individual, usually one of the company’s employees.
The complexity of registration procedures leads to the fact that there are almost no specialized enterprises on the used car market in Ukraine, and almost all cars are sold from hand to hand by individuals. At least, that’s what it looks like according to the documents, since even if the car dealer is engaged in resale, he is not officially listed among the participants in the transaction. Accordingly, auto traders do not pay taxes on these transactions.
Meanwhile, taxing car sales on the secondary market could become a significant source of tax revenue and support the national budget at a time when international financial assistance to Ukraine is being reduced.
“During the war, revenues to the state budget of Ukraine from the automobile market became the second largest after revenues from business related to the trade of petroleum products,” MP Irina Gerashchenko wrote in her telegram channel. — And the volume of trade in used cars is at least 18 times higher than the sale of new ones. Moreover, in 97.8% of cases, the buyers were individuals.”
Last year, the used car market declined significantly, but this year it is showing rapid growth. The explanatory note to the bill notes that if last year 780 thousand cars were sold in Ukraine, this year sales are expected to be almost twice as much - at 1.5 million. And, of course, the state would not mind receiving taxes from these operations. According to the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, Daniil Getmantsev, the state receives an average of 19.8 thousand hryvnia from the sale of a car “in the white”, while from the sale “in the black” - nothing.
It is expected that if the new law comes into force, car dealers will be able to show their transactions for the purchase and sale of used cars in official accounting reports and pay taxes on them. And these can be significant amounts.
Of course, it will not be possible to collect taxes on the sale of 1.5 million cars this year, and it is unlikely that cars will be sold exclusively through car dealerships. Therefore, let’s take a more realistic figure for calculations – 500 thousand. If tax revenue from the sale of one car is about 20 thousand hryvnia, we get a total of 10 billion hryvnia in potential budget revenues.
Who will pay
Meanwhile, while authorities calculate future profits, the main question that worries car owners and buyers is who will fund the budget and how this will ultimately affect the cost of cars.
“Probably, prices for cars in showrooms will be slightly higher than those offered by resellers or individuals,” said Oleg Omelnitsky, director of the information and analytical group AUTO-Consulting, in a conversation with Apostrophe.
However, according to him, one can expect better quality service from salons.
“At the showroom, the buyer will know that the car has been checked to ensure that it is not stolen, that he can test it safely, and that he will be given certain guarantees that it will be prepared for sale. And the payment can be made through a bank,” explains the expert. .
In turn, Oleg Nazarenko believes that prices on the secondary car market should not rise
“This law does not prohibit citizens from selling cars from hand to hand or using the services of resellers, as they do now, it only allows car dealers to also join this market,” explains the expert. “And it’s clear that if showrooms offer cars more expensive than resellers, then buyers simply won’t come to them. So it’s unlikely that dealers will be able to raise prices.”
Therefore, it is now very difficult to predict how popular the idea of selling and buying used cars through specialized dealerships will become in Ukraine. Moreover, over several decades, effective mechanisms for appropriate trade have been established in the country.
In addition, Ukrainians are suspicious of such government initiatives.
“This law is lobbied by car dealers and importers, who always oppose the interests of people - those who want to buy affordable cars in Ukraine,” Ivan Kazachuk, a lawyer for the public organization Auto Euro Power, told Apostrophe. “So it is unlikely that this law is intended to provide these people with additional opportunities to meet their needs.”
Thus, it is not at all impossible that Ukrainians will continue to sell and buy used cars the old fashioned way - from hand to hand, and the state budget will be left without billions of tax revenues.
