Auto

Bumpy road ahead

BY BRIAN BONITTO Associated Editor — Auto and Entertainment bonittob@jamaicaobserver.com

Friday, February 15, 2013    

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WHILE the details of the new tax package are yet to be communicated to used- and new-car dealer groups, both agree that consumers are likely to have to dig deeper in their pockets to acquire a motor vehicle.

"We need to know exactly how high the increases are going to be. However, based on the projections of the Government, it seems as if it is going to affect us negatively," said Lynvalle Hamilton, president of the Jamaica Used Car Dealers Association (JUCDA) and principal of Auto Channel.

"We are very worried," he continued.

Hamilton, whose group comprises 65 members, said the association understood the country's economic plight and is willing to play its part.

On Tuesday, Government approved a $16.4-billion tax package and a $45 billion contribution to the Government coffers from the National Housing Trust over four years.

The tax package includes new fees and taxes to be paid at Jamaican ports, (such as an Environmental Levy, Customs User Fee/Customs Administration Fee, Common External Tariff, and Additional Stamp Duty) and an adjustment to part of the General Consumption Tax base. The projected earnings from this tax is $1.5 billion and becomes effective on March 1, 2013.

In addition, there will be the application of a Custom Administration Fee (CAF) on all imports (except for charitable organisations and the bauxite sector). The projected revenue from the CAF is $1.2 billion and this becomes effective on April 1, 2013.

"If the duties go up, coupled with the shortage of vehicles in Japan and the rising American dollar, we're going to see a lot of dealers closing down," he said.

Hamilton said used-car dealers currently have vehicles in stock. "However, it is going to cost more to replace the stock with these new measures in place. And, it may very well be at a cost that the average Jamaican cannot afford," he said.

Hamilton's counterpart, Kent LaCroix — who heads the new-car dealership group, the Automobile Dealers Association -- expressed similar sentiments on the proposed taxes.

"We're all concerned, as this will negatively affect the cost of doing business," said chairman LaCroix.

However, he noted that his organisation is yet to receive specifics on the new taxes, but was confident it would have ripple effects.

"Car prices are likely to increase. If there is an increase in duty, I don't see how we would be able to absorb it in its entirety. Whatever we can bear we will, but some of it would be passed on to the consumer," he said.

In June of last year, the Government hiked duty on imported vehicles with 2,000cc rating from 20 to 30 per cent. This was part of an effort to raise $23.4 billion in new taxes.

This move resulted in a 35 per cent decline in new-car sales in June to September and a $2 billion-a-year gap in the Government’s budget.

Both LaCroix and Hamilton agree that the Government would not get the revenue projected if the duties are too high.

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