Two vehicle distributors fined $1.76M for contravening Motor Vehicles (First Registration Tax) Ordinance

30 Jan 2013

Two registered distributors of vehicles were fined a total of $1.76 million today (January 30) at the Kowloon City Magistrates' Courts for selling new vehicles at prices higher than the retail prices approved by the Customs and Excise Department (C&ED), contravening the Motor Vehicles (First Registration Tax) Ordinance.

The case was referred by the Transport Department (TD) to the C&ED for investigation in March 2012. The two vehicle distributors which were located in To Kwa Wan and Kowloon Bay jointly sold four seven-seaters private cars at $2.23 million, $890,000 higher than the retail prices approved by the C&ED.

The vehicle distributor in To Kwa Wan was responsible for importing vehicles and handling the documentation for first registration, while the vehicle distributor in Kowloon Bay was responsible for arranging exhibitions and sales of vehicles, as well as the signing of sales and purchase agreements with buyers.

In the case, the offending vehicle distributors used fabricated item to cover up the raised prices. The contracted selling prices included club membership fees to evade the first registration tax. In one of the transactions, the club membership fee was as high as $280,000 which was equivalent to 77 per cent of retail price approved by the C&ED. The two vehicle distributors were fined a total of $890,000 for selling new vehicles at prices higher than the approved retail prices.

In addition, the vehicle distributor in To Kwa Wan sold two other vehicles without approved Published Retail Prices (PRPs) and was fined $800,000. The vehicle distributor in Kowloon Bay which was not a registered vehicle distributer was fined $70,000 for selling new cars.

The C&ED welcomes the courts' penalty imposed on the above case. It is the highest fine on similar cases.

Earlier this month, there was another convicted case in which a vehicle distributer in Happy Valley was fined $1.07 million at the Eastern Magistrates' Courts for selling new vehicles at prices higher than the retail prices approved by C&ED.

The case was convicted on January 4. In May 2012, the C&ED was tipped off about a vehicle distributor in Happy Valley suspected to have sold new vehicles at prices higher than the approved retail prices. After investigation, it was found that the vehicle distributor sold four new vehicles at a total sum of $2.49 million, $1.55 million higher than the approved amount.

The vehicle distributor falsely declared to the TD the selling prices of two of the vehicles at $250,000 by disguising the sold vehicles as lower-end models. The total selling prices of the cars was $1.3 million.

In the case, the buyers paid higher prices for the purchase of the vehicles. Owing to the false declaration made by the vehicle distributor, the vehicle models shown on the Vehicle Registration Documents were incorrect. This may affect the arrangements of re-selling and change of ownership of the vehicles in the future.

A C&ED spokesperson said that cases of selling vehicles at prices higher than the approved prices by the C&ED were on the rise in recent years. The offending vehicle distributors raised the PRP without applying for approval from the department in order to gain higher profits. The modus operandi included not disclosing the approved retail price to consumers, covering up the raised prices by fabricated items, or providing incorrect information on the sales and purchase agreements and other forms submitted to the TD. As a result, consumers paid higher amount when purchasing the vehicles.

According to the Ordinance, companies importing vehicles for selling locally are required to submit the price information of the vehicles to the C&ED to facilitate the department in assessing the PRP of the vehicles. The first registration tax of a vehicle is calculated according to the PRP and the company should not raise the retail price without C&ED's permission when offering the vehicles for sales. The company has to re-submit an application to the C&ED for a new PRP should there be any change to the retail price of the vehicle; otherwise, the company will contravene the law.

The C&ED advises members of the public who plan to buy imported vehicles should ask the distributor for a PRP list and the relevant first registration tax of the vehicle for reference, and verify all the contents of the document before signing. Consumers should not sign on blank forms or forms with unclear fees items. The buyer can verify the retail price with or report the sales methods in doubt to the C&ED and TD.

Under the Ordinance, a person commits an offence when selling a new motor vehicle at a price higher than the PRP without the consent of the Commissioner for Transport. Offenders convicted are liable to a fine of $500,000 and imprisonment for 12 months.

Ends/Wednesday, January 30 2013

Previous Page