May 06, 2016 News
It’s a done deal. Persons will no longer be allowed to able import vehicles that are older than eight years. The restriction includes motor cars, vans, buses, sport utility vehicles and pickups.
The restriction is effective May 1, 2016, according to a Guyana Revenue Authority notice published in yesterday’s edition of the Guyana Chronicle.
The restriction would not immediately apply to trucks and other categories of heavy vehicles. Truck owners, involved in the transportation business, have complained that any restriction would make prices totally unaffordable.
The GRA notice explained that the measure was announced by Minister of Finance, Winston Jordan, during the presentation of the 2016 National Budget. It was subsequently presented in Parliament in February and assented to on March 14, 2016.
The restrictions are all part of a larger, long term “green” strategy to ensure that Guyana does not become a dumping ground for older vehicles.
However, auto dealers had been urging Government to rethink those plans and to meet with them to talk about a new tax structure that will not cause hardships for stakeholders.
The Finance Minister also 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 a 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.
The Finance Minister also announced that from May 1, 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 Toyota Premio and Allion sedan family cars, would become cheaper.
But not so fast, says auto dealers. Local car importers are asking Government to rethink its proposed tax change for used, imported cars, saying that an eight-year-old restriction will effectively drive prices up as the newer the cars, the more expensive it will be.
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, the dealers said.
With many families depending heavily on the local banks for loans, the dealers had claimed that 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 be 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 had said.
It is a fact that the used vehicles in biggest demand now in Guyana, from an affordability standpoint, are between the years 2002 to 2010. The majority of sales are the 2002 to 2007 models that range between $2M and $3M.
Based on the current tax formula proposed by Government, a 2008 Premio would cost beyond $3M. In the past, just a few of the 2008-2010 models 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.”
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.
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