“VAT regulation in automotive increases informality”

vat regulation in automotive increases informality 0

A warning came from automotive dealers to increase VAT from 1 percent to 18 percent in vehicle purchases and sales.

President of the Automotive Authorized Dealers Association (OYDER), who participated in the Bloomberg HT broadcast and made evaluations, Turgay Mersin, reminding that as of April 1, VAT will be increased from 1 percent to 18 percent in the purchase and sale of vehicles by car dealers, and in second-hand vehicle sales. He pointed out that there will be an increase as much as the VAT rate.

Indicating that there will be an increase in second-hand prices, Mersin commented, “Second-hand prices have been stable for the last three months. This situation may push the non-corporate car dealership to informality. Since VAT will be deducted from the profit, not the entire vehicle, it will not affect the purchase much.”

“Causes victimization”

Chairman of MASFED Aydın Erkoç said, “Increasing the VAT rate in automobile purchase and sale will increase the informality, the state incurs tax losses, and both the buyer and the seller lose their money. It will cause suffering,” he said.

An objection was raised to increase the VAT rate, which is 1 percent in vehicle purchase and sale, to 18 percent. Motor Vehicle Dealers Federation (MASFED) Chairman Aydın Erkoç stated in his statement regarding the new regulation that the second-hand automotive industry will be adversely affected by this.

Indicating that the VAT regulation caused unrest in the second-hand sector, Erkoç said:

”Along with the shrinkage in the world economy during the pandemic period, there is already a contraction in our country. According to the data we received from EBS Danışmanlık, when we look at the January-February 2022 period, although there was an increase of 10.3 percent compared to the same period of the previous year, there was a decrease of 45 percent compared to 2020, 8 percent compared to 2019, and 22 percent compared to 2018. The fluctuating course of the exchange rate, high interest rates and the problems experienced in the production and supply of new vehicles due to the chip crisis and the high prices of second-hand cars will force both buyers and sellers, while increasing the VAT rate to 18 percent will cause the industry to stop.

Underlining that registered businesses that pay taxes to the state and contribute to employment by employing personnel, will be adversely affected by this regulation and that informality will increase, Erkoç said, “Under a corporate roof , by paying taxes, by employing personnel, The increase in the costs of the tradesmen will cause an increase in the second hand prices, causing both professionals and citizens to suffer more.”

“It will be difficult for the industry to stand up”

Erkoç stated that 7 million 651 thousand 810 vehicles were changed hands according to 2021 data, about 2 million of which were authorized. Expressing that it was done by registered tradesmen who have a certificate, and about 1 million by real consumers, he said, “Nearly 4 million of this trade was made by people who buy and sell cars, who are not related to their profession. Unfortunately, this arrangement will increase individualization while ending institutionalization. It will become more and more difficult for small tradesmen to survive and to employ personnel. The sector expects the inspection of the second-hand regulation issued by the Ministry of Commerce and the implementation of the necessary sanctions for those who do not comply with the rules, and the Ministry of Finance to identify those who make unregistered sales. Otherwise, it will be very difficult for the sector to stand up again, and the problems will continue to grow day by day,” he said.

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