Tax, duties and parrallel imports
Perth, 23rd May 2010
With the European markets in tatters mainly because of the financial woes in Greece, Portugal and Spain, we may well be heading back into economic trouble again. Further, China has clamped down on the residential property speculation, putting a dark cloud on its own domestic growth. Now Australia has joined the fray by announcing a super tax on the profits from the big mining companies. Iron ore is one of Australia’s biggest and most profitable commodities and it is claimed that the new government tax would seriously affect the companies’ competitiveness and thus the country’s economy…
Anyhow in the light of that I wanted to talk about tax and duties on lighting products. Many countries protect their own industry by levying taxes and duties on imported products, lighting included. Till recently countries like India were even closed for foreign lighting products. From my understanding (but this varies from case to case) lighting products imported into China end up nearly 30% more expensive then the same product manufactured locally. It is therefore not surprising that considering the huge Chinese market, many European lighting manufacturers have production or assembly plants in China. Truth be spoken, the labour cost in China is of course much lower too.
Some years ago for a project in Indonesia, we had specified a Philips down light. When we conducted the tender interview, one of the suppliers offered the exact same Philips down light at near half the price the other local suppliers did. Smelling a rat, I questioned the supplier how it was possible his Philips down light was so much cheaper than the Philips agent in Indonesia could offer. He admitted that he had ways to import the down light from Singapore without paying the taxes and duties… that was my first encounter with the so called “parallel” imports. These products are often imported “hidden” in the back of a big container of which the main goods are something totally different. I guess you could say they are smuggled in. One of the main issues with parallel imports is the warranty and maintenance service. It is understandable that the local agent will not extend this for goods not purchased through them.
With exchange rates moving up and down, duties and taxes varying from case to case, one can see that managing the cost of supplies is an art by itself!