By: Christopher Tan

Car importers who under-declare the value of their vehicles are in for a rougher ride.

Singapore Customs is attempting to curb the tax dodging by imposing more stringent checks before allowing a vehicle into the country.

About a dozen parallel importers have had around 70 vehicles stuck in the port for several weeks as their declared values were unrealistically low.

The cars include the Nissan GT-R sports car and the Porsche Cayenne sport utility vehicle (SUV) and other high-end models. Their declared values were said to be half or less than the rates declared by authorised agents.

Another batch of cars held up earlier were allowed in after their importers revised their values.

The intensified front-end checks are expected to have an impact on the car market. Some industry watchers attribute the recent weak certificate of entitlement premiums to parallel imports being delayed at the port.

Singapore Customs has for years relied heavily on its post-import audits to weed out companies fudging vehicle values.

Although some culprits have been nabbed this way, the process is tedious and disrupts business. Cartons of documents and even computers are seized from suspects in some of these audits.

When under-declaring is proven, Singapore Customs recovers the owed duties and also imposes penalties.

The Land Transport Authority (LTA) is then informed. It in turn informs car owners - sometimes tens of thousands of them - of the revised scrap value of their vehicles. A car's scrap value hinges on its import value.

Although it will still conduct post-import audits, Singapore Customs said it is 'stepping up its verification of importation documents'.

Assistant director-general (trade) Teo Siew Lan told The Straits Times that the department wants to send a clear message that it is not worth submitting false values.

'We will not hesitate to prosecute such cases and push for deterrent sentences,' she said.

Last week, the importer of a Porsche Cayman was convicted of under- declaring the car's value.

Project manager Soh Chee Kwang was fined $95,000 for stating that the car was worth 28,000 euros (S$59,895) - 20,000 euros less than its actual value. He will have to pay at least another $44,000 or so to the LTA.

Singapore Customs said it has prosecuted five cases since 2003. The offenders were fined a total of $1.6 million.

Other cases were settled through composition fines amounting to $5.3 million.

Officers also recovered about $6.8 million in excise duty and goods and services tax from these cases. The LTA is estimated to have recovered a further $35 million or so.

The Automotive Importers and Exporters Association, whose members are parallel importers, said vehicle taxes must be reviewed to discourage under-declaration.

Its president Neo Nam Heng said registration taxes should be slashed and scrap rebates removed. 'Then, nobody will under-declare,' he said.

He said that if this was not feasible, then Singapore could consider taxing cars according to their sale prices. This so-called point-of-sale tax is applied in Hong Kong, among other markets.

Cars in Singapore are now taxed upfront, with tariffs at over 120 per cent of the vehicle's import value.

This article was first published in The Straits Times on 28 June, 2008