Russians want U-turn on taxing car imports


A planned tax hike on imported cars is roiling Russia, whose government is caught between the populist demands of middle-class protesters and a crumbling automobile industry.

The dozens of demonstrations that have cropped up across Russia in recent weeks haven’t been particularly big. However, they have been significant as the first notable show of widespread dissent in the near-decade since Prime Minister Vladimir Putin cemented his hold on power.

Organizers say they will keep up the pressure unless the government reverses its decision to raise taxes on imported automobiles.


The tariff, which takes effect in January, has pitted an ailing domestic auto industry against working people, especially in Russia’s eastern flank, who have come to rely upon the import of inexpensive Japanese cars for transportation and employment.

Underscoring the depth of the problem, the country’s biggest carmaker on Monday announced plans to suspend production until early February. All three of Russia’s largest auto companies have turned to the state for help in recent months as car sales plummeted.

AvtoVAZ, maker of Lada cars, was forced to temporarily halt production because the supply of parts had been interrupted, Russian media reported. The company did not answer questions sent Monday by e-mail.

In the past, the country was flush enough with oil revenue that the government could avoid this kind of disruption. But with unemployment rising rapidly and car sales plunging, the country’s leaders have been forced to prioritize.

So far, Putin appears determined to save the domestic auto industry. Over the weekend, amid the protests, he promised subsidized loans to motorists willing to buy Russian. He also floated the idea of offering “state support” to foreign carmakers operating plants in Russia.


Jobs in the balance

Infuriated drivers say it’s not enough. In Russia’s eastern lands, an influx of cheap cars from Japan has spawned an explosion in car ownership -- and created jobs for importers, car parts wholesalers and mechanics who helped shore up the region as industry slumped.

The tax hike, which will be determined for each vehicle based on a complicated formula, will drastically increase the cost of foreign cars and trucks. Vehicles older than 5 years will be slapped with a duty of at least 70%, making their importation unprofitable.

“The dissatisfaction of the people has almost reached its limit,” said Viktor Cherepkov, former mayor of the far eastern city of Vladivostok and president of the Assn. for the Protection of Motorists. “Today these are purely economic actions, but if the president doesn’t heed the voice of the people, the protest will become political in character.”

As oil prices climbed in recent years, then-President Putin rode a wave of popularity. Steady raises in salaries and pensions won over the middle class, and creeping state control over the media kept criticism to a minimum as civil rights and democratic reforms were carefully rolled back. When term limits forced Putin to leave the presidency in May after eight years in office, he easily installed a handpicked successor, Dmitry Medvedev, and took on the job of prime minister.

The financial crisis poses the first serious challenge to Putin’s rule, and the government appears worried. Riot police from other parts of Russia were reportedly sent to quell demonstrations in Vladivostok on Sunday, where protesters and journalists said they were beaten and arrested.

As winter has set in, a relentless stream of gloomy economic news has rattled many Russians. Moscow’s Levada Center, an independent polling agency, recently found that pessimism about the future had grown by 21 percentage points in just a few months. It’s the sharpest shift the pollsters have documented since financial instability racked Russia in the late 1990s.

“We are not at the bottom of the crisis,” said Marina Krasilnikova, an analyst with the center. “People think they have good reason to believe that the situation will be even harder in the near future.”

More than a quarter of respondents reported that a member of their family had received a salary cut, had been unpaid altogether or worked in a place where layoffs were occurring, Krasilnikova said. But despite the buildup of anxiety, analysts say the great majority of Russians haven’t turned against the government -- at least not enough to voice their opposition.


‘Still a great hope’

“People are very pessimistic right now, but there is still a great hope that the government will be able to improve the situation or at least make it less dramatic,” Krasilnikova said.

Alexander Pikulenko, an auto industry analyst with the independent radio station Echo of Moscow, downplayed the protests. The discontent was centered in the far reaches of Russia, he pointed out, and a demonstration in Moscow drew relatively few people.

“The government is tasked not to support the far east but to support the national auto industry, and that’s what they’re doing,” he said.

“As we know, revolutions never happen in the suburbs. They always happen in the capital.”