Poor man will have to pay more for newer cars

Feb 09, 2016 News

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-dealers ask Govt. to reconsider proposed tax change

By Leonard Gildarie
A plan by Government to restrict the importation of vehicles older than eight years into the country will only make the vehicles more expensive for the working class, auto dealers are warning.
The body now wants Government to rethink those plans and to meet with them to talk about a new tax structure that will not cause hardships for stakeholders.
Finance Minister Winston Jordan in his 2016 presentation of the National Budget gave notice of the administration’s intentions to remove the Excise Tax on motor vehicles that are under four years old and lower than 1500cc. These vehicles currently attract Excise Tax at the rate of 30 percent with an effective tax rate of 118.7 percent.
With this removal, Jordan explained, the effective tax rate will be reduced to 68.2 percent.
Another major impact from the budget would be the reduction of excise tax from 50 percent to 10 percent on motor vehicles under four years old – that is for vehicles between 1500cc and under 2000cc. The effective tax rate of 152.3 percent for this category will be reduced to 85 percent.
From May 1, the Finance Minister also announced, there will be restriction on the importation of used and/or re-conditioned vehicles older than eight years old from the date of manufacture to the date of importation.
It was widely felt that vehicles, especially the popular Premio and Allion sedan family cars, would become cheaper.
Not so fast, says auto dealers.

The changes in the tax structures if allowed to go ahead the way they are proposed will make those cars way too expensive for a normal working class family.
With many families depending heavily on the local banks for a loan, many workers barely are eligible for a $2M loan. And these are for the cheaper cars, more than eight years old.
According to the Guyana Auto Dealers Association (GADA), already there is a demand for used Japanese cars that are 2008 and newer. This demand has pushed prices for sedans like Allion and Premio to around US$10,000.
“The import duties paid on these will in most cases still be way higher than the current flat rate structure taxes that we currently pay on vehicles that are older than four-years-old.
“Since the purchase cost overseas will be higher…and the import taxes will be higher, it’s obvious the cars will cost much more and thus be out of the reach of the average Guyanese,” GADA said in a statement yesterday.
The association is also concerned over the restriction of motor vehicles older than 2008 which will have a huge impact on prices and affordability.
It is a fact that the used vehicles in the biggest demands now in Guyana, from an affordability standpoint, ranges between the years of 2002 to 2010. The majority of sales are the 2002 to 2007 models which range from between $2M and $3M.
Based on the current tax formula proposed by Government, a 2008 Premio would have cost beyond $3M. In the past, just of the few of the 2008-2010 models sold, costing between $3M and $4M have been selling, the association insisted.
A 2003 Premio is around $2.2M currently.
“With the proposed ban, we will be removing the $2M and $3M ranges and basically just leaving the $3M-up range which knocks out the most purchased and afforded models currently in Guyana.”
The association said it has worked out the costing based on the current formulas and it can be concluded that the most popular models will cost more.
“A Toyota Allion was chosen because it’s one of the most popular and wanted cars on the market. It works for many purposes and applications from families, individuals, executives, taxi drivers, car rentals, etc. So it should be a model that will give us a good base to examine the various structures and how they will relate to selling price and affordability.”
GADA also note that what is also worrying is that majority of the customers that purchase the 2002 to 2007 models do so based on financing either via the bank or through the dealer.
“…and in most cases these customers barely qualify and barely make the necessary payments. And now to ask them to increase the acquisition cost to $3M upwards will either make it too expensive for them to afford or force them to sacrifice financial resources from other key aspects of life in order to afford a vehicle which has become a necessity for many.”
Another concern for the association is the eight-year restriction will impact negatively also on the costs for buses, pickups and trucks, including the mid-size “Canter”.
In the cases of the buses, the 2002-2008 models cost between $2.2M and $4M with the most bought pickups being for the period1990-2008. These cost between $2.4M and $5.5M.
Trucks and Canters trucks for the 1997-2004 period are on average between $1.7M to $4.8M.
Newer models, between 2008 and 2016, will cost more and see customers paying millions of dollars more, dealers said yesterday.
The association stressed that customers prefer the older, sturdier pickups which are more suited for the hinterland roads than the softer, newer ones.
“We, the auto dealers of Guyana, respectfully ask that the tax structure be reconsidered so that the perfect balance can be found between revenue earner, newer models and affordability.
“We also suggest that discussions be held with the auto dealers, Government and all stakeholders to find the perfect balance that meets the needs of all.”
The association estimates that with 80 percent of customers only affording up to $3M in spending for a car, the proposals by Government will have huge, negative impacts on the used car importation business and that of vehicle ownership in the country.
The David Granger administration, which came in office last May, had vowed to reduce the cost of vehicle ownership, by reducing the taxes.

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