While dealers of new cars have welcomed the budgetary measure announced by Finance Minister Winston Jordan, last Friday, to reduce excise tax on imported used vehicles not older than four years, the measure has been utterly rejected by a vast majority of others in the industry and poorer class Guyanese in general.
This budgetary measure, which attempts to reduce the number of aged vehicles on the country’s roads, will bring little or no real benefits to low- and middle-income earners.
Minister Jordan, during his budget presentation, announced the removal of excise tax on vehicles under four years old and 1500cc.
This, he said, is part of the APNU/AFC Government’s measures in support of its programme of ‘greening’ the economy and protecting the environment.
Currently, these vehicles attract excise tax at the rate of 30% and an effective tax rate of 118.7 per cent.
Minister Jordan explained that, with this proposed removal of excise tax, the effective tax rate will be reduced to 68.2 per cent.
“The reduction of excise tax from 50 per cent to 10 per cent on motor vehicles under four years old, between 1500cc and under 2000cc. As a result, the effective tax rate of 152.3 per cent will be reduced to 85 per cent. Restriction of the importation of used and/or re-conditioned vehicles to under eight years old from the date of manufacture to the date of importation. This restriction shall be enforced from May 1, 2016,” Jordan said.
According to a report in one of the local daily newspapers today, several auto dealers commenting on this budget measure have condemned the move as anti-business and anti-development, noting that this “bizarre” move will not benefit the majority of Guyanese who will go for a low-end foreign-used car, older than eight years, which will cost an average of $3.1 million including taxes.
AUTO DEALERS’ OUTRAGE
According to the report, ne auto dealer said the proposal will only benefit the upper-middle class: “The average man, who buys a car, in majority of the cases, would take a loan from the bank and sometimes they are hardly able to get that loan of maybe $2.5 million or $3 million. So I don’t know how the government expect these people to be able to get a loan now for $7 million and $8 million. This I believe is to benefit friends and supporters and not the poorer people.”
Another dealer said while Government is talking about growing the country and jumpstarting the economy, it is in the same breath putting systems in place that will significantly dent the local auto industry, one which has made significant strides over the years.
“I am surprise they saying that the economy is struggling and they will put a stimulus in the budget to help the business community (but) low and behold this restriction on the age of used car importation. If we have to bring these cars which are so expensive, what will we sell them for, we will not make a profit and people will not be able to buy them. This decision will only kill this car business,” another dealer said, as he expressed frustration at what he termed “jumbie economics” being practised by the APNU/AFC Government.
Other dealers have accused government of satisfying the interest of a selected few, particularly those who are dealers in new vehicles.
Meanwhile, Leader of the Opposition Bharrat Jagdeo, told reporters during a news conference immediately after Friday’s budget presentation, that the ban on the importation of vehicles eight years and older will completely deny the poorer class of Guyanese from enjoying the luxury of owning a vehicle.
“Vehicles beyond eight years now will be banned, so a lot of vehicles that are coming into this country, they older and cost a bit more in foreign currency for the country because they are not as efficient etc, they are a bit more polluting, but at least a section of our population that is maybe middle income, lower middle income, poor can still afford something to drive; now they are not going to be able to with the banning of vehicles that are eight years old,” Jagdeo said
As if to rub salt into the wounds of having to purchase newer vehicles at exorbitant costs, Minister Jordan gave notice of the intent by government to ban the importation of used tyres and to reduce taxes on new tyres to encourage their use.
“This ban will be put into effect as soon as some procedural hurdles are cleared,” Jordan said.
It is important to note that the announcement by government is a mere reduction in the taxes and not a complete removal. But, even in the case of a complete removal, a new tyre is more than 400 per cent more expensive that a used tyre.
Dr Jagdeo, commenting on this measure, said the banning of used tyres will significantly put at a disadvantage hundreds of poor Guyanese. Many businesses could also be forced out of operation, he said.
“Just imagine banning used tyres, how many people will be able to afford new tyres now? Most of the tyres that are used in our system are used tyres. From a safety perspective you need to properly look at the quality of the used tyers, but when you ban them completely you are transferring money into the pockets of the few people who are importing new tyres and you taking money out of the pockets of ordinary people who can only afford used tyres for their vehicle, so the cost of four new tyres, if you have to put on your vehicle, will be probably about 10-15% of the cost of acquisition of your vehicle,” commented Jagdeo, a former two-term President, Finance Minister and Moscow-trained economist.