Russian tax a new threat for foreign cars?

Russia – Keen on protecting its domestic automotive industry from the demand made by the World Trade Organization (WTO) that it should cut import tariffs on foreign cars, new WTO member Russia is still said to be inhibiting car buyers and manufacturers through the introduction of new fees such as the Vehicle Recovery Tax.

Promoted as a tool to reinforce Russia’€™s car and car recycling industry, the new fee means that taxes will be collected from vehicle manufacturers as well as importers. As a direct result, the latter will include the sum in retail prices, the nation’€™s news channel Russia Today has reported.

The Russian car industry is largely supporting the legislative move, believing that without the government’€™s intervention, the country would be full of imported used cars. Cynics argue, however, that this supposedly recycling-friendly solution has little to do with industry and more to do with controlling the market given that the collected money is not being ring-fenced for recycling.

At present, there are no companies in Russia actually engaged in the recycling of the plastics, glass and textiles used in cars. Moreover, there is only one car battery recycling factory in the Moscow area, while recyclers handling rubber account for just 5-7% of the total volume of recyclable material available.

Up to 30 advanced shredder facilities like the one recently completed in Turkey (which has the capacity to handle 100 000 cars a year) would be required in Russia for the proper treatment of all automotive material. Each would cost roughly US$ 20 million and so industry sources believe the new tax probably serves as a starting point to accumulating the funds.