The FINANCIAL — Two taxis stand side by side on Chargali Street in Sanzona. The 21 Soviet Union Lada dates back to 1974 and features a faded red chassis. The 1996 Opel Astra shows off a well-painted green chassis. They work in the same district, charge the same fee but one is a mature 36 year-old car and the second, a teenager of 14.
“This is the competition,” said Michael Tsiklauri, 41, sitting behind the Opel’s steering wheel, “If I charge more the client will go to another taxi. It can still happen even though the average customer prefers to take my car because it looks more comfortable. Today one lady told me she came to me because she thought the 21 Lada could lose its floor while in motion.”
In most European countries the older the car is the higher the taxes on it would be: people try to buy newer vehicles so as not to waste money on shabby engines. Also insurance is mandatory. According to statistics gathered by the magazine Investor.ge, the number of registered vehicles in Georgia in 2005 was 483,600. In 2009 the number grew to 645,853. Almost 80 percent of them are imported second hand cars and about 60-70 percent of these vehicles well past their prime as they are between 10 and 15 years old. As car insurance is not mandatory in Georgia, very few vehicles are covered. The Department of Statistics say that they don’t know the data on how many cars in Georgia are insured.
The media often informs us that we are in an environmental crisis. The burning of hydrocarbons in particular coal and oil products was found to be the main source for greenhouse gas emissions in the atmosphere.
On June 12, 2010, the Norwegian Atlantic Committee (NAC) organized the 3rd seminar on environmental issues in Tbilisi. The NAC’s Programme Director Liana Jervalidze explains that old and powerful cars considerably damage the environment as their high carbon emissions seriously pollute the air. “These old cars pollute the air,” she said. “They produce far more carbon emissions than new vehicles, so they are less friendly to the environment we live in. It won’t be bad if our government takes some measures to regulate the ownership of old cars.”
The problem is two-folded. Legislation is needed, but new vehicles are expensive and many people would not be able to afford new vehicles.
Vano Mtvralashvili is the Chairman of the Association of Oil Products Importers and Distributors. He thinks that air pollution is not the only issue: the Georgian car park mainly consists of over 10 year-old imported cars, with mainly broken and repaired catalysts which can’t filter the fuel properly.
“It doesn’t matter what kind of quality petrol you use if the car has an unarranged combustion system and excludes asphyxiating gas,” he said. “If we don’t renew the auto park we will have more polluted air. Although as far as I know our air pollution isn’t as bad as in other countries.”
“In many countries governments enforce taxes or restrictions on the import of old cars,” added Mtvralashvili. A similar measure though would be very unpopular in Georgia till there are no more improvements in the economy.
“I’m against similar bills here,” he added. “In the case of taxes the Government should help everybody with financial incentives to purchase new vehicles, because for some people their car is the source of their income. In a few years if our economy revives again, we can talk about it, but not now.” The only measure the Government took against old cars was to increase customs duties for the vehicles produced before 1998.
Importing used cars from abroad remain a profitable compromise. The business boomed in 2007 when Georgian banks started to give credits to people with the minimum salary of 400 GEL. Strada Auto is one of the auto trading companies which imports vehicles from Japan and the United States. Rezo Magalashvili, the company’s director, explains that till May 2008 there was a great demand on average brand cars like Toyota, Hyundai and Kia; the war in August 2008 though had a big impact on both prices and demand. His deputy, Levan Asanishvili, says that in the second half of 2009 the market recovered. “If at the end of 2008 and the beginning of 2009 we were selling about 40 cars per month now we are selling 70-100 used vehicles every month.” Asanishvili explains, “almost 90 percent of customers look for a medium brand from 2000-2003. There is no demand for cars dating before 1997.”
Statistics show the trend. In 2009 the number of imported new cars was 2,012 against 32,241 used vehicles. In the first two months of 2010 286 new cars were imported against 5,158 used cars.
Both Asanishvili and Magalashvili say that taxing old cars would be a bonus for car sellers like them as it would boost the demand on newer cars; neither of them thinks that taxes on cars up to 20 years old will change the current statistics.
“If we want to have fewer old cars in our city,” stresses Magalashvili, “then taxes should be set for cars as old as even 15 years. But first of all we need better living conditions and higher salaries.”
The Chief Expert of Municipal Transport Committee Avto Tsakadze said that according to the President’s statement all private taxis are free from any taxes. After this statement it is hard to find any statistics on how many there are nowadays or how old these cars are.
Is it really possible in Georgia to set any taxes on cars older than 20 years?
Samwel Isakian, 60, who drives the red 21 Lada, is the only bread-winner in his family. Two years ago he stopped working as a broker and started driving a taxi in his district. Despite the shabby vehicle he has his own customers, he would like to buy a new car but simply cannot afford it. “Sometimes I repair it myself, making a new part from two old pieces,” he said.
This Lada is so old I don’t even dare to work in the city. I know it has more emissions and it looks horrible. I would have any new model with great pleasure but how can I buy a new car? If the Government sets taxes for old cars it should be to improve people’s situations not to reduce them to poverty.”