Tax on new cars causes Algerians concern

26/08/2008

Algerians say a new tax on new cars will hurt both dealers and middle class citizens, who will have to pay more for their vehicles.

By Achira Mammeri for Magharebia in Algiers—26/08/08

[Getty Images] New taxes on personal vehicles mean Algerians are paying more for new cars.

The Algerian government says it created a new tax on personal vehicles to encourage and subsidise public transit. Algerians, however, complain about the burden of having to pay more for new cars.

Since July 28th, dealers have been required by law to pay a new tax, ranging between 50,000 DA and 150,000 DA per new vehicle. Dealers are also required to pay a 1% duty on their total annual turnover. Ultimately, the dealers pass on the additional cost to the consumer, raising the price of vehicles.

Algerian Minister of Finance Karim Djoudi said the new financial measures are needed to subsidise consumer costs for major public transport developments such as trams and the metro.

For his part, Algeria's General Director of Taxes (DGI), Abderrahmane Raouia, told the press that the new taxes are expected to bring in between 6 and 7 billion DA to the treasury every year.

Auto dealers and the public are unconvinced.

The Algerian Car Dealers’ Association issued a public statement noting its dissatisfaction with the decision, and criticising the unilateral nature of the government's decision.

"Members of the association’s policy bureau have looked at the repercussions of the steps taken by the authorities without involving those working in the car sector, one of the most important sectors of the national economy," the statement said.

The association asked the government to delay the introduction of the new taxes in order to complete reviews, but the request was unsuccessful.

An account manager for a French auto dealer in Algiers told Magharebia that the new taxes came as a surprise.

"We are caught between a rock and a hard place. On the one hand, there is pressure being brought to bear on us by the government, which is imposing new taxes without warning. On the other hand, there are customers who placed orders weeks ago, not knowing that the starting price would have to increase," said the account manager.

"We are facing a real dilemma."

Many customers say they cannot afford the new taxes.

"I’m sorry I sold my car," said Mohamed, who sold his old car and had planned to buy a newer model. "The prices of new vehicles have gone through the roof."

The middle class, which often resorts to loans in order to purchase vehicles, has been particularly hard-hit by the new taxes.

"It’s as if they want to prevent the middle classes from owning cars," said Hakim, who works in public administration. "This is an underhanded sanction. The country is rich and does not need to go picking the people’s pockets to finance public transport."

According to Mohamed Bairi, President of the Algerian Car Dealers’ Association, new cars make up 80% of the Algerian vehicle market.