Monday, 11 August 2008
TO THE CHAIRMAN OF THE CONSTITUTIONAL AND LEGAL AFFAIRS OF THE PARLIAMENT OF GHANA
RE: REPEAL PNDCL300 of 1993
PNDCL300 of 1993 must be repealed because it violates the “Freedom and Justice” motto of Ghana. The system of valuation followed by CEPS is exploitative, dishonest and extorts money from Ghanaians. The following questions must be asked about PNDCL300 of 1993. Is it appropriate? Is it just? Is it reasonable? Appropriateness, justice and reasonableness are the bedrock of any legal system. PNDCL300 of 1993 fails to answer all the three questions. It is inappropriate, unjust and unreasonableness. It is inappropriate, unjust and unreasonable because it empowers Ghana Customs, Excise and Preventative Services (CEPS) to over value the price of a used car. In summary, PNDCL300 is cheating on its own citizens. All decent citizens must condemn all forms of undervaluation and over valuation of prices of imported used cars. I set forth the case to repeal PNDCL300 of 1993 below. In this agitation I propose to use case study examples to make the case in favour of repealing PNDCL300 of 1993. I am grateful to Mr Africanus Owusu-Ansah of CEPS for his explanation of the reasons why PNDCL300 of 1993 was passed into law. I had two telephone interviews with Mr Owusu-Ansah in London and Ghana respectively. From the little information that I gathered from my interaction with CEPS officials and a government minister, I understand few people imported used cars and produced receipts that undervalued price of used cars. The undervaluation was done to avoid paying appropriate import duty and taxes on imported cars. In response to curb the undervaluation of the prices of imported used cars, the PNDC government issued a decree to stop the undervaluation of prices of imported used cars. Suffice to write that the primary and secondary objective of PNDCL300 was to stop under-valuation of cars and to bring uniformity into the calculation of import duties and taxes on used cars. Undoubtedly PNDCL300 of 1993 has succeeded in bringing uniformity in relation to used vehicle valuation and calculation of import duty and taxes. However, the uniformity argument is flawed and unsustainable, as I will show in this agitation. I will propose an alternative to PNDCL300’s Home Delivery Value (HDV). I believe that my alternative proposal is appropriate, just and reasonable. Let me begin with the case study examples.
Case study 1
In October 1990 Mr A bought a used C Class Mercedes for $10,000 in Dallas Texas. He shipped the car to Tema and produced a receipt that undervalued the same car for $5000. Mr A thus avoided paying the custom duty and taxes on $10,000.
Case study 2
In October 1990 Mrs B imported a used C Class Mercedes Benz from Hannover, Germany for 6,000 Euros. She freighted the car to Tema and produced a receipt that undervalued the same car for 4,000 Euros. Mrs B thus avoided paying the appropriate import duty and tax because she undervalued her car.
Case study 3
In October 1990 Madam J bought a used C Class Mercedes Benz for $8,000 at New Jersey. She shipped her car to Ghana. She did not undervalue her car. She produced a genuine receipt for $8,000. She paid import duty and taxes on $8,000. She did not cheat.
Case study 4
In October 1990 Mr. G imported one C Class Mercedes Benz from France. He shipped the car to Tema and claimed that car it was a birthday gift to him. What value must CEPS use to collect import duty and taxes on Mr. G’s Benz? From the above case studies, it was obvious that the system was being abused. So how did the PNDC government address the above abuse? The military government issued a decree empowering CEPS from henceforth to disregard all receipts for imported used cars into the country. CEPS were directed to accept receipt for new cars but to use the Home Delivery Value (HDV) to calculate import duty and taxes on all used cars over the age of five years.
Under the democratic dispensation the NDC government in parliament passed the PNDCL300 of 1993 act into law, which allowed CEPS to continue to use the Home Delivery Value (HDV) for all imported used cars. Since 1993 CEPS have used the HDV system for valuation to calculate import duty and duties on all used cars.
I tender into evidence a recent transaction.
Make Model Type Opel Omega S/Car
Chassis No W0L0VBF69X1OO6119
Year of manufacture 1999 CC: 2.5TD
Home Delivery Value-HDV 22,986.00 Euro
Depreciation Allowed 11,493.00 Euro 50%
FOB (Cost) 11,493.00 Euro
Freight 535.81 = US$849.00
Cost and Freight 12,028.81 Euros
Insurance 105.26 Euro
CIF 12,134.07 Euros
Exchange rate 1.6644
CIF in GHCedis 20,195.96
DUTIES AND TAXES
10% Import duty 2,019.60 Processing fee 0.00
Vat 2,776.95 Inspection fee 0.00
NHIL 555.39 Interest charge 99.33
Ecowas 100.98 Network charge 76.52
EDIF 100.98 Net charge VAT 9.57
Exam fee 201.96 Netcharge NHIL 1.92
Shippers 2.50 0%
Certification 0.50 Overage Penalty 0.00
TOTAL DUTY PAYABLE 5,946.80
The above is hard evidence from CEPS for a car that I imported from Germany to Ghana in June 2008. The used car was priced at Euro 3,800. But I paid Euros 3,200. I paid Euros 555 for shipping from Hamburg to Tema on June 04, 2008. Using the HDV has made it possible for CEPS to charge import duty and tax on a used car in excess of 300% of what I paid for the car. I am able to produce receipt for the car. Suffice to write that I did not pay anything near the Home Delivery Value. Therefore I feel cheated by my own government. PNDCL300 of 1993 has succeeded in three ways. Firstly, the law has succeeded in homogenizing prices of imported used cars for calculating import duty and taxes. The law appears to have solved the undervaluation of prices. Secondly, the law has succeeded in extorting more money than necessary from importers. However, the final but the most important success of the PNDCL300 is the legitimization of an illegal act of over valuing prices of cars.
PNDCL300 of 1993 has unduly and unjustly over valued prices of used cars in excess of the market value to calculate and collect import duty and taxation under the rationale of curbing undervaluation. Over valuation is the same as under valuation. Indeed it is my submission that the Home Delivery Value is a legitimatised daylight robbery of Ghanaians.
When one thinks of CEPS valuing a 9 years old car at 12,137.07 Euros it is an open injustice. The fact is that nowhere in Europe or the US is a 9 years old Opel Omega sold for Euro 12,137.07 or GHCedis 20,195.96. Indeed it is proper for the Legislature to be concerned about the wrong of undervaluation. Rightly so, the Legislature must seek and find fairer ways to deal with the wrong of undervaluation of cars. I think that parliament must criminalize false declaration of prices of used cars with intent to evade taxes. However, it is ethically wrong for a government to over value the price of a used car. I maintain that any form of over valuation and, or undervaluation are wrong. The two wrongs cannot be right. The current system of HDV makes a nonsense of pricing because nowhere in the world is the price of a five years old car is the same as a 9 year old.
What is the way forward? Here is my proposal for a fairer and just system. Firstly, parliament must repeal PNDCL300 of 1993 before the next general election. Second, the Home Delivery Value must be replaced with Market Value (MV). The Market Value system is what Used Car Dealers uses to determine the price of used cars in Europe, Asia and the US. Indeed Market Value of any product is what every reasonable businessperson will use to buy and or sell his/her products. For example, if the government has over valued Ghana Telecom, Vodafone UK will not have shown interest. Therefore the government by its own standard is using the market value of a product in the sale of Ghana Telecom. The Market Value takes into consideration several factors like age, mileage, ownership, service record of the used cars and many more.
If parliament wishes to direct CEPS to use the market value system, information is readily available. CEPS can get a booklet of market value of all used cars as a guide in determining the value of used cars. The argument of valuing all similar used cars at the same price based on HDV defies economic logic. Even in the US and Europe no similar or same used cars are sold at the same price. Any Ghanaian legislator, minister, diplomat or CEPS official that have travelled abroad can categorically testify that a 1999 Opel Omega 2.5TD will not be sold at Euros 12,137.07. At best the market value of a 1999 registered Opel Omega 2.5TD will be sold between Euros 2,000 – 3,500. Therefore, to value a 1999 Opel Omega 2.5TD at Euros 12,137.07 is completely wrong. It is a daylight robbery of Ghanaians living in the Diaspora. In conclusion, PNDCL300 of 1993 violates the principle of Freedom and Justice enshrined in our motto. The government may have the freedom to enact laws.
However, the basis of every law that is passed is to deal justly with citizens. Where is the justice when a government in its attempt to curb under-declaration of prices of used cars do come out with an act that overtly robs its own citizens? The inappropriate, unreasonable and unjust valuation of imported used car to calculate custom duties and taxes on are driving prices of used cars out of the range of affordability.
If CEPS adopts the Market Value system, prices of used cars will reflect their real value. Importers will not be paying way over the market value of used cars. And if import duty and taxes fall, the price of used cars on the market will also fall. This is likely to bring the cost of transportation down as well. It seems to me that used car sellers are forced to pass on the cost of custom duty and taxies to buyers. Many are the stories of persons that are unable to pay custom duty and taxies on cars they have imported because CEPS have over valued their cars and charged them. When they have complained about the unjust calculation of duty and taxies they have been directed to lobby parliament to change the PNDCL300 of 1993. This is exactly what I am doing in this agitation for the benefit of all Ghanaians. Parliament must repeal PNDCL300 of 1993. If parliament repeals PNDCL300 of 1993 everyone will be a winner. Nobody will have to pay way over the real value of used imported cars into the country.
Pastor Jones-Lartey (London)