New vehicle import regime will allow for re-fleeting

KINGSTON — Minister of Finance and the Public Service, Hon. Audley Shaw, says the revision of the import tax regime will bring the cost of new motor vehicles within the reach of most Jamaicans.

Opening the 2011/12 Budget Debate in the House of Representatives April 28, Mr. Shaw had announced that the Common External Tariff (CET) applicable to motor cars, including sport utility vehicles (SUVs), would be reduced from 40 per cent to 20 per cent , effective May 2.

He also advised the House that the CET on motorcycles, with engine sizes below 300cc and 600cc, would be reduced to 10 and 20 per cent, respectively. Additionally, he said the CET on all terrain vehicles would be reduced to 20 per cent, and the Cost Insurance and Freight (CIF) value, to which the current 20 per cent duty concession is applicable, would be increased from US$25,000 to US$35,000.  The general consumption tax (GCT) on second sale vehicles was also increased.

Speaking at the launch of KIA Motors 2011/12 line of SUVs, at the company’s Chelsea Avenue showroom in Kingston on Thursday, Mr. Shaw noted that the tariff regime governing the motor vehicle industry, prior to the announced changes, featured high taxes, big gaps between categories of units and a concession framework which accounted for some 38 per cent of all imports.

 He argued that these issues made motor vehicle purchase and sale complicated, time consuming and “just downright inefficient”.

He said that the budget reduction will be good for the motoring public, with long overdue changes being finally instituted. With the reduction in duties offsetting the increase in CIF process, due to external factors, the average car sold in Jamaica will now return to 2007 price levels.

Mr. Shaw explained that a 2011 Toyota Corolla with a landing CIF value of US$13,370 ($1.5 million), attracting a customs duty and special consumption tax (SCT) aggregate of 130 per cent, will now attract duties of 62 per cent. This will result in the purchaser enjoying a 32.7 per cent reduction in the overall price of the vehicle.

“This means that the price has now moved from $2.65 million down to $1.78 million, a savings of $870,000 on the one motor vehicle,” he noted.

Commenting on concerns from stakeholders that the new regime “favours the big man”, Mr. Shaw said the claim arose because the duty rate on vehicles with capacity of 3.5 litres upward fell, from an average of 184 per cent to between 81 per cent and 91 per cent, while units ranging between two and 3.5 litres fell from an average 119 per cent to 66- 76 per cent.

He pointed out that figures for 2009/10 showed that, of the 145 vehicles imported during the period, only four units were brought in at full duty in the category of the 3.5 litre and over.

“So it means that the balance of 141 vehicles either came by concession, or they came by some other means. It is clear that the revenue that the government was getting was negligible, and that a high incentive to bypass the system existed. This is evidenced by the low numbers of imports and low prices declared,” the Minister said.

Mr. Shaw contended that the new regime should yield concurrence among all stakeholders that it will increase revenue.

“The market will be stimulated with price reductions leading to an increase in sales, and the transaction speed will be improved due to the elimination of most of the concession processes, because of the bureaucracy that had been associated with that,” he argued.

Other benefits and measures the Minister revealed included reduced incentives for under declaring CIF values, and reducing concession abuse and discretionary waivers.

“And best of all, it will afford Jamaica the opportunity to re-fleet, by putting the cost of a new vehicle within the reach of most Jamaicans,” Mr. Shaw said, while welcoming the Automobile Dealers Association’s (ADA) endorsement of the new regime.

By DOUGLAS McINTOSH, JIS Reporter