Deputy Financial Secretary Cites Significant Growth in Motor Vehicle Industry

Deputy Financial Secretary in the Ministry of Finance and the Public Service, Paul Lai, says the local motor vehicle industry has grown significantly over the past 15 years, with more than 400,000 units being imported during the period.
This figure includes cars, Sport Utility Vehicles (SUVs), and trucks, he said. Speaking at the recent Annual General Meeting of the Jamaica Used Car Dealers Association (JUCDA), at the Jamaica Pegasus Hotel, on September 11, Mr. Lai, who represented Minister without Portfolio, Senator Don Wehby, said imports for the 2007/08 fiscal year amounted to some $19.2 billion in Cost, Insurance and Freight (CIF).
Of this amount, he said, almost $12 billion was collected at the ports, via customs duties, General Consumption Tax (GCT), environmental levies, and customs user fees. He informed, however, that the GCT paid to the Inland Revenue Department, is not incorporated into that figure. He also disclosed that used car dealers figured in a significant number of the imports.
“For motor vehicles (imported), cars and SUVs, the used car dealers accounted for around 70 per cent of these. So, without a doubt, the role of the used car dealers is vital, as they provide a service to a particular niche market, the transport sector, and, at the same time, contribute to the Consolidated Fund,” the Deputy Financial Secretary stated.
Mr. Lai argued that, undoubtedly, every individual is desirous of owning a motor vehicle, but was quick to point out that, in most instances, this was determined by their financial standing.
He argued that, in the face of “perennial macro-economic challenges, and environmental issues,” Government must ensure that a balanced, responsible set of motor vehicle policies are in place that will fit into their economic framework, and, simultaneously, reduce the impact on the environment.
“Hence, in arriving at policies, consideration must be given to identifying the right balance between vehicle engine size, age of vehicle, (and) condition of vehicles,” Mr. Lai said.
He noted that, to the extent that the country’s oil consumption can be satisfied without creating macro-economic instability, such as depreciation in the value of the dollar and inflation, the amount of foreign exchange available is not infinite.
“In fact, in an effort to reduce the oil bill, Government has taken steps to implementing alternative energy [options]. And, in respect to motor vehicles, there is an announcement by the Minister of Energy, that ethanol-mixed fuel, will become available to motorists, sometime before the end of this year,” the Deputy Financial Secretary informed.
Commenting on the industry’s tax policies, Mr. Lai noted that these have the dual effect of generating revenue to “take care of Government’s business,” while, at the same time, trying to keep the country’s oil bill and subsequent economic variables, within manageable levels. He contended that tax policies, in general, have not been geared towards “favouring any special interest groups,” but are tailored towards specific policies.
“Take, for instance, the matter of the structure of the flexi-fuel hybrid vehicles, where the tax policy on these.are geared to encouraging cheaper and more environmentally friendly fuel usage. The lower rates on the smaller engine size vehicles, is also an attempt to encourage motorists to purchase these.
“We accept that the tax structure, prior to May of this year, was somewhat complex, and steps were taken to address this. Further, we accept that the rates are also high, especially for the larger sized vehicles, which, in all likelihood, have led to some avoidance,” Mr. Lai said.
He noted that, whilst there is the propensity to avoid taxes when rates are high, simplification of the tax structure will help in reducing evasion.
“Tax reform is still on the agenda, where the emphasis is on simplification, equity, and base broadening. Of course, not everyone is happy, but there is the commitment to having evaluation of the structure and policy, (which was) announced earlier this year,” he stated.
The Deputy Financial Secretary said that one of the concerns that the Ministry has, relates to what he said are “too many instances” of dealers who have not been “fully compliant” with revenue payments. To this end, he said Senator Wehby had committed to having dialogue with the various stakeholders.
Noting that tax evaders within the used car sector had impacted negatively on stakeholders operations, Mr. Lai said dialogue serves to “bring some order to the industry.”