URA tax calculations encourage buying old cars

Left, a Toyota Progrès 2000 and right, Toyota Progrès 2005.

If a Japanese man drove around Cape Town, he will certainly think he is in 2016. But if he came to Kampala, he would probably think he time-travelled 17 years back. Why? Because of the average age of most cars on the road.
It is probably hard to explain to a less-travelled Ugandan that Ipsum, Spacio, Progrès, Pajero and Prado are no longer driven in many countries.
Perhaps the best illustration would be for that Ugandan to go to Havana, Cuba where most cars are from the Communist era.
One will argue that the residents of Cape Town, London or Tokyo are in first world countries and can afford newer cars. What is interesting is the cars we drive here are even more expensive than their 10-year old counterparts in Tokyo or London.

It costs Shs16m to bring in a 2000 Toyota Progrès after tax. But anyone driving that one can afford a 2008 BMW 3 series in London.
The main reason in my view is the taxation structure as evidenced by the motor vehicle calculator on the URA website.
The first major hurdle is the environmental tax. This is meant to encourage Ugandans to buy newer cars to reduce degradation of the environment due to old cars.
However, it does not serve its purpose, taking the example above.

A 2000 Toyota Progrès at $2,148 cost, insurance and freight (CIF) is charged an environmental levy of Shs3.8m. A 2005 model at $4,000 CIF is charged Shs6.8m. So, the levy is skewed towards cost of the car but there is no incentive towards age.
Buying the 2000 model saves me Shs3m in tax yet I am buying it $2,000 cheaper than the 2005 model. The increase in cost should be compensated by the tax incentive since it is a newer car that will cause less damage to the environment.
The other issue is taxes are charged against URA’s pre-determined valuation not against an individual’s invoice and this is quite high.

A 2006 Mercedes Benz ML is $12,000 CIF according to the 2015 valuation report while on autotrader.co.uk, a UK car trading website, you can get one for as low as $6,000 CIF.
Also the taxes alone for a 2014 Toyota Land Cruiser priced at $52,000 CIF is Shs97m.
Even with the average salary of an MP, one would need to borrow money from a bank. Add bank interest and it costs more than a 2015 Lincoln Navigator in US.
This means we are poorer but we pay more. If our MPs cannot afford new cars, no one can.

Initially, the valuation was to standardise the cost of similar vehicles as there was a risk of undervalued invoices.
But with online car catalogues and payments made through international banks to reputable registered car traders, that risk is non-existent.
But buying old cars is bad for us all, apart from being stuck in the past, newer cars come with better safety features, for example HAC, a feature that prevents cars from rolling backwards when starting on hills. Some of the accidents on our roads might not necessarily be life-threatening but definitely the chances of survival are reduced in older cars.

It is also not good business for our car industry. Imagine with all the Toyotas on our roads, Toyota Corporation neither has a parts manufacturing factory here nor has a training facility for Ugandan mechanics. This is because as a country, we are not a significant client to Toyota Corporation apart from the government and a few organisations. For the ordinary folk, they no longer produce the models we drive but also we buy cars from the people and traders of Japan, not Toyota Corporation.
Older cars have a short lifespan. Most of the cars we bought in 1996 are now piled up causing environmental pollution. We buy old cars at twice the price every after 10 years. This is a sure way to help remove soon-to-be scrap and waste from Japan at our cost.

In my view, URA does not need to reduce nor remove the tax, but to use the actual invoices instead of their valuation.
It is in the interest of our lives, our country and URA itself to pay Shs8m in tax for 2006 car using my own invoice than pay Shs8m for a 1999 car using their own valuation.

The writer is a car enthusiast.