PARALLEL importers have helped to increase competition in the motor trade, and consequently, helped to bring down car prices.

Unlike authorised agents, these importers do not get their cars directly from vehicle manufacturers. Instead, they source their products from overseas dealers. 

Factor in the profit margins that these overseas dealers make and parallel imported cars would typically have a higher “landed cost” here – that is, cost plus freight and insurance. 

And yet, parallel importers have generally been able to sell cars at noticeably lower prices than similar models sold by authorised agents. 

Many are able to do this because they have far lower overheads than manufacturer-appointed dealerships. No fancy showrooms, no factory-trained personnel, no comprehensive spare parts inventory, no huge advertising and marketing budgets, no dedicated after-sales facilities.

This was the business proposition when parallel importers first appeared in the early-1990s. 

But as more appeared on the scene, the competition heated up quickly. To be competitive, some resorted to less honest means. 

The most common method is to underdeclare the cost price of the car. By doing so, the car’s open market value (OMV) – upon which registration taxes are based – becomes lower. Because car taxes amount to about 120 per cent of its OMV, a lower value can give the seller a substantial cost advantage.

Singapore Customs cracks down on these cheats regularly, because under-declaring a car’s value is tantamount to tax evasion. Its latest swoop yielded seven parallel importers suspected of evading $3.4 million in excise duty and GST on about 3,000 cars. 

If convicted, they could be made to pay up to 20 times the amount evaded. If they can’t pay, they will be thrown behind bars. The OMVs of the affected vehicles will be adjusted. 

That’s not the end of it. After a conviction, the Land Transport Authority will act to recover unpaid registration taxes arising from the adjusted OMVs.

And motorists who happen to have bought such vehicles will then get a letter from the LTA notifying them of the new OMV, and consequently, the car’s higher scrap value. 

So it would seem that consumers are in a win-win situation. If tax-evading parallel importers get away with it, they can continue to buy cheap cars from them. If the crooked importers are caught, the cars’ scrap values are raised. 

The question is: Should consumers continue to get away scot-free? If it is against the law to receive stolen goods, should buying a car with an unrealistically low OMV be unlawful too? 

The argument against this would be that it is unfair to expect consumers to know about the subtleties of OMV. 

But is it, really?

Car buyers are a savvy bunch these days. The Straits Times and Consumers Association of Singapore often receive OMV-related complaints from the public.

The most common gripe? The car they just bought had a lower OMV than what the salesman promised. And they know well that a lower OMV translates to a lower resale or scrap value. 

No one has received a complaint yet about an OMV that is too high.

While we leave the argument with lawmakers, let us be clear that parallel importers are not the only ones who under-declare. Big, established authorised agents have been taken to task too. 

The next group that may find itself in a sticky situation are those who import re-conditioned cars. Since the barriers to importing used cars were lifted two years ago in 2007, mint-condition used high-end imports have appeared regularly. 

The OMVs of such cars are typically much lower than new cars – on the basis that the vehicles are second-hand. But are they all in fact pre-owned?

It makes you wonder, especially when you see hotly sought-after models like the Nissan GT-R appearing as “used” – just one month after the official model's launch in Japan. At the time, such a "used" car could fetch a higher price than a brand new GT-R because of the long wait list.

Now, the man in the street has no way of knowing that, has he?