Russia's new car import duties cause billion-dollar damage to nation's budget

The decree of the Russian government to raise customs duties on the import of foreign-made cars came into force in the very beginning of 2009. The budget of the Russian Federation will lose about $1 billion as a result of the new rules. The adversaries of the new duties in Russia received support from the European Commission. European officials said the Russian government was not observing the WTO membership agreements.

Prime Minister Putin signed the decree to raise customs duties on car imports for nine months in the beginning of December 2008. The decision sparked massive protests across Russia, especially in the Far East of the nation, where the majority of people use Japanese cars in their business and every-day needs. A large group of police officers was sent to the Far East from the Moscow region to “pacify” the protesters.

Residents of Vladivostok, the capital of Russia’s Far East, say that one-fifth of the city population will become unemployed as a result of the new customs duties, which doubled the cost of used Japanese cars. Those, who are not involved in the car business, also said that they would never buy and use Russian cars.

The lobbying of interests of the home car industry will cause serious damage to the federal budget. Employees of the customs of Vladivostok have already evaluated the damage, which the local budget will suffer after entrepreneurs stop importing cars from Japan because of the new rates.

In 2008 the local customs office collected 62 billion rubles – car import duties made up 45 percent of the amount. This year, the income will drop by at least 40 percent, The Kommersant newspaper wrote.

Long lines of cars have vanished from the border territory in Russia’s Kaliningrad , where about 20 percent of residents are involved in the car business.

Russian car owners received support from the European Union. Spokespeople for the European Commission said that the actions of the Russian government contradicted to the bilateral agreement of 2004 about the WTO membership. Spokespeople for Japan’s Foreign Ministry also urged Russia to cancel the new customs duties, which, as officials said, violated the free trade principles.

Novy Region

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Author`s name Dmitry Sudakov