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New tax dents car sales

Brian Bonitto

Friday, May 10, 2013    

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JAMAICA'S once vibrant new-car sector is experiencing sputtering sales since the Government's April 1 implementation of the Customs Administration Fee (CAF).

According to Kent LaCroix, Automobile Dealers Association (ADA) chairman, the CAF has had an immediate and debilitating effect on the industry.

"The April sales figures have declined by about 10 to 15 per cent when compared to that of March. Coupled with the declining Jamaican dollar, it can only get worse if nothing is done," said LaCroix, who represents the 18-member association.

A fee of $55,000 is imposed on each car entering a bonded warehouse.

LaCroix said his organisation is not opposed to paying the CAF.

"We are, however, opposed to paying it before the vehicle is sold. They are in a warehouse and not going anywhere. That just does not make any sense," he told Auto. "Dealers are already paying for security and for customs annual bonds. This move only adds to the cost of holding the vehicle without any returns."

Major Richard Reese, commissioner of customs, said he would not be able to accomodate the ADA's request.

"It is in the Government's interest to collect the revenue upfront," he said. "So, if a car stays in a warehouse for a year, we would have to wait a whole year to collect that revenue."

Reese said that his office has made itself available to all sectors and accommodations were made for the manufacturing sector.

LaCroix said he is, however, seeking a meeting with Dr Peter Phillips, minister of finance and planning, to discuss the dire state of the industry and the way forward.

LaCroix said dealers cannot entirely absorb the new taxes as it would have to be passed on to the consumer. In addition, the move may result in a shortage in supply of new vehicles as dealers may not import on a timely basis.

"New-car dealers are terribly disappointed that customs has not considered putting the CAF at the back-end, that is, when the vehicle leaves the wharehouse. That would be more practical," he said.

This is not the first time LaCroix is at odds with the Government's revenue-enchancing measures.

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

"We are not against paying taxes, but it cannot be done at the expense of crippling the industry," he told Auto at the time.

As part of measures aimed at bringing in an additional $16.4 billion into its coffers, the Government in April implemented a CAF on all imports (except for charitable organisations and the bauxite sector). The projected revenue income is $1.2 billion.

In March, there was an application of new fees and taxes paid at 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. That move was projected to rake in $1.5 billion.

"Right now, we are creating a reserve for customs, at the expense of the dealers," he said.

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