25 Jul 18

Erwin Boumans, BDO: LatAm lacks legislation to push auto imports, production

In general, Latin America lacks fiscal incentives to help encourage automobile imports and production as well as smart mobility solutions, according to Erwin Boumans who is tax partner for international accounting and business advisory firm BDO.

In our brief talk with Bouwmans, we discussed taxation and legislation in some of the main countries throughout the region, 

Global Fleet:  How do the local car taxation rules encourage or discourage the importation and production of cars in Latin America?

Boumans: For the most part, there isn’t much fiscal incentive to push vehicle imports or production in Latin America. Actually, in Brazil [the region’s largest car market], there are very heavy taxes on imports and production.

However, this does not seem to be discouraging the market as there are several main players importing, selling, and producing cars in the country.

As for Mexico [the region’s second largest market], its tax law actually encourages the exportation of vehicles rather than the importation of goods, and this is why it is one of the world’s largest vehicle exporters.

The country’s main incentives are the 0% VAT rate and free duties stemming from free trade agreements, most of which fall under the North American Free Trade Agreement (NAFTA).

Meanwhile, there isn’t much in Argentina’s and Colombia’s tax system to encourage importation and production, and local car tax rules actually discourage the importation and production of cars in Ecuador. Finally, there is no production in Chile and Peru. The former, however, does receive a lot of imports.

Global Fleet: Could you tell us a little about the markets in Central America and the Caribbean?

Boumans: Considering some of the larger car markets in the region, I can say that there are no specific tax incentive for the automotive industry in Guatemala or Cuba, the latter which has quite strict vehicle import rules.

Only Cuban legal entities authorized by the Foreign Trade and Investment Ministry can import vehicles, as well as representations of diplomatic missions, consular offices, and international agencies whose right of representation is evidenced in Cuba.

Imports must also be done in accordance with the technical requirements set forth by the Ministry of Transportation.

Erwin Boumans speaks at Fleet Europe event, sister company of Global Fleet.

Global Fleet: What about smart mobility solutions such as alternative transportation. Is that encouraged in the region?

Boumans: In Brazil, alternative modes of transport are not really encouraged from a tax perspective. For instance, taxation on vehicles used for Uber or other similar ride-hailing apps is the same as those charged to private car owners.

Uber drivers also face unfair competition against the taxi as cab drivers get tax breaks on car purchases while Uber drivers do not. From a passenger’s point of view, however, using Uber is currently cheaper than flagging down a cab.

Meanwhile, despite the lack of fiscal incentives in Mexico, there are several ride-hailing services in the country such as Uber, Cabify, and Carot. They, however, are frequently attacked by today’s mobility status quo.

As for other countries, Argentina, Ecuador, Guatemala, and Cuba are not doing much to push new mobility alternatives with the latter really only pushing traditional public transportation.

Authored by: Daniel Bland