What do the taxes on vehicles say?

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A quick look into custom duties of vehicles is enough to tell us how discouraging it is for any individual to purchase a car. For the vehicles that run on fossil fuel, the customs duties on 9 categories stand at 30% while that on the ‘Jeep, car and van’ category is almost three times that of other categories. Similar is the case with the electric vehicles. The customs on Jeep, car and van is 40% which is much higher than the 15% customs in other categories. The general belief that cars are luxury goods and should be taxed high seems the logic behind this. But, are cars luxury or high taxes have made them a luxury?  Higher taxes resulting into higher prices have made the cars less affordable to the middle and lower income class and thus only providing privilege to the rich. And, even if we regard them as luxury, are the rich only the ones who get to enjoy this luxury?

In the midst of current fuel crisis, promoting the use of the electric vehicle has become talk of the town. The customs on electric vehicles are definitely lower when compared to the vehicles that run on fuel, however, this rate seems still high for encouraging its use. If the uses of electric vehicles are really to be encouraged and promoted, the custom duty along with other taxes must be further reduced.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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