Why you pay so much for cars in Ja

BY JULIAN RICHARDSON Assistant Business Co-ordinator richardsonj@jamaicaobserver.com

Sunday, December 26, 2010

GOVERNMENT'S onerous tax regime has forced Jamaican consumers to fork out exorbitant amounts of money for motor vehicle purchases.

Indeed, local car prices are amongst the highest in the region and industry experts place the blame squarely at the feet of Government.

"The Government is just making too much money on vehicles," laments Kent LaCroix, president of the Automobile Dealers Association, the umbrella group for dealers of new cars.

"The thing is, at the end of the day, it is the consumers that are the ones being hurt because they are more and more unable to pay these high duties," he argues.

The state charges a burdensome 63.5 per cent to 194 per cent of the Cost, Insurance and Freight (CIF) value of motor vehicles being shipped into the country. These taxes are a complicated mix of a Custom Duty, Special Consumption Tax (SCT), General Consumption Tax (GCT), Environmental Levy (ENVL), Custom User Fee (CUF) and other charges.

In fact, the 40 per cent custom duties imposed by the Jamaican government is the highest in the region, says Jamaica Used Car Dealers Association (JUCDA) president Lynvalle Hamilton. The dismal consequence of which, Hamilton adds, is that car prices are beyond the reach of the average Jamaican consumer.

"Persons are moving from car lot to car lot trying to get a deal (on a car) and they are not going to find it because cars are unreasonably expensive. This is not as a result of the dealers putting any high mark-up on the vehicles, it's just the Government being inconsiderate," Hamilton tells Sunday Finance.

According to LaCroix, dealers only make a modest 10 to 12 per cent margin on motor vehicles.

Against that background, look below at how the cost of a 1.5 litre engine (1500 cc) motor car with a CIF value of $1 million is more than doubled by the time it reaches point of sale to you -- the customer.

(NB Custom Duty, Environmental Levy and Custom User Fee are all calculated as a percentage of CIF value. SCT is calculated as a percentage of: CIF value plus Custom Duty. GCT is calculated as a percentage of: CIF Value plus Government charges plus dealer mark-up)

So, in this case, the Government collects almost a half of the $2.3 million paid by the customer (see illustration), whose spending power is already significantly weakened because a fourth of his/her salary is taxed. The dealer, on the other hand, is left with little profit when one factors that the mark-up covers expenses for staff, utilities, rent, supplies, and other operating costs.

Interestingly too is that this costing is at the lower end of Government's tax scale. As the engine size of the vehicle increases, say to 2.4 litres (2400cc), SCT charges are also increased and hence the cost disparity between CIF value and sale price becomes even more astonishing.

However, industry trends reveal that local consumers are becoming increasingly unable to afford motor cars at these high prices, supporting Hamilton's earlier assessment. Sales reports from the two major segments -- new and used cars — of the industry paint a daunting picture.

LaCroix says that at just over 3,000 new car sales in 2010, the subsector's performance remained relatively flat in comparison to 2009. However, the rent-a-car market represented a "significant" portion of the vehicles purchased in 2010.

"So, what you're talking about is that a significant less number of vehicles were sold to the (regular) consumer," notes LaCroix.

It gets worse in the used car segment. According to Hamilton, sales have declined by up to 50 per cent this year compared to 2009.

"The vehicles are not being sold because the consumers just can't afford them...earlier on we had suggested that it would be about 7,000 (sales) but I'm inclined to believe it will be much less than that -- nearly a 45 to 50 per cent decline," says the JUCDA president, who is also the managing director of Auto Channel.

Against this background, the industry insiders say that Government's tax regime is killing the local automobile sector and is in fact depriving the state coffers of additional revenues.

"At the end of the day, the more people stop buying is the less money that will go into the coffers...You can see that the number of vehicles that are being imported is getting lower and lower each year," argues LaCroix.

Hamilton adds that he is "...absolutely sure if the duties were reduced by 10 to 15 per cent, the government would collect more money because cars would be more affordable."

But what do you think? Tell us how much taxes you think Government should impose on motor vehicles. Have your say by voting in our online poll tomorrow at www.jamaicaobserver.com.

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COMMENTS (23)

Ainsworth Cole
12/29/2010

Jamaicans you should all think about what I said in my comment below. Bill Clinton came and spoke about changing systems so the country can be better off. The Tax systems in Jamaica is not right nor equitable, we must reorganise and adjust how we tax. It must not be burdensome preventing ordinary people from living comfortably compared to other nations. Our people will not be able to compete in productivity if their energy is sapped and their pockets emptied leaving nothing to sustain themselves

Kiss Mi-Neck
12/28/2010

Why must we pay 198% on a vehicle that MPs and certain classification of goverment employees pay on 20% (concession). Where else in the world can citizens enjoy diplomatic status is their own country?!
You do the maths, afta the MP pay the 20% is we have to fork over the balance of 178%!!!
Next time you see Mr. MP beg him a drive off your car cause is you pay for it!!!!

12/28/2010

Your article while informative omitted a key piece of information. MPs and certain levels of government employees are enjoying duty concessions on the same if not more expensive vehicles. As far as i know Everybody from Prime Minister down who is a Jamaican citizen of this country should be subject to the same tax laws. Since when did MPs and civic servants become Diplomats in their own country? We paying for their vehicle from our pockets but caan borrow it fi go supermarket!

Nejeeper KNG
12/28/2010

The average Jamaican’s ambition is been taken advantage of. As a people we make great sacrifices to change our personal economic status, even if the job is to clean dodo. In USA there a cars driving on the roads that past inspection but cannot be imported into JA because of the age of the car. There are two king of people in JA the Govt/Upper-class and poor people. What we are talking about here have to do with poor people, in JA poor people are for votes they are not suppose to be ambitious.

12/28/2010

The Government too damn teef! Jeezam piece, man! edm must stop it! Stop ripping off f the people - JLP - PNP, etc!!!!!!!

rondol brown
12/28/2010

The story about the car prices in Jamaica is so sad. I am a young man living in this country and I am concern about the leadership. It is unbelievable that we are paying so much money in taxes for a car. Th Bible says, "where there is no VISION the people perish".
Passion can take you out of slavery, but it will not take you into freedom.

don king
12/27/2010

i agree with everyone here .. i had to laugh at Ainsworth Cole's comment because that's what i was thinking only sadly i am still here. anyone notice the year model vehicles that government officials are driving? mostly 3000cc SUV........... i guess they need the tax to pay their own salaries every month because i am not really seeing where else its been spent.

Clarence Thomas
12/27/2010

The title of this article should be "Why you pay so much for commercial industrial vehicles in Ja."
Are we really going to build Jamaica with cars and suv people?

otis bernard
12/27/2010

unlike countries who manufacture vehicles so they guard against market local market,so certain duties are imposed against imports,Jamaica is nothing to loose.in my honest opinion its a stargedy to rob us without a reason.untill u provide something to compete with then there are no solid grounds for this kinda duty.Bruce wernt u outa power for a longtime?so u must have felt a little squeeze.Youve reached now so uve forgotten what u left us in and continue to apply the pressure.Release the chains

otis bernard
12/27/2010

As a jamaican and used car dealer living abroad,its really painful to see what the duties are.I have also a registered business in jamaica to operate a used car business there but am barred by the heavy duty imposed on vehicles.recently i shipped a vehicle there for my prsonal use and was more than shocked at duty been more than double the cost price..they even revalue the vehicle for more than i paid for it.Jamaica doesnt even make a bicycle,so ur not gaurding urself against anything.cruelty is

anton brown
12/27/2010

Peter Pan, most people are law abiding citizens, even when the law is stupid. So sorry, but we don't want to help spread corruption by going around the system. Additionally, even if most people who bought a new car wanted to go around the system, they cannot because if most people started to do it then swift clampdowns would come. Your solution is no solution at all for most persons. Wheel and come again.

Peter Pan
12/26/2010

Let us me honest here! The people in the know DO NOT pay these exorbitant taxes when they import their (high-end, higher CC) vehicle. If you have the right links, you can import your vehicle at for considerably less than what is shown by the example. Only fool fool people pay these outrageous taxes. The people and the Ministry of Finance/Customs would want you to believe otherwise, but there are many ways around the "system"!

paul brown
12/26/2010

It is incomprehensable that the Golding administration is making difficult for Jamaicans to own a car. The JLP once again is demonstrating that it is an establishment that favors the affluent, Although the onus tax package is troublesome to everyone involved, it is the middle class who is mostly affected. For years, the PNP government has made easier for the people to own a car and now the JLP is making harder. This comment is not motivated by favoritism, but is verge on reality.

s mclean
12/26/2010

Jamaica is just becoming less and less attractive as the days goes by. pretty sand and people are elsewhere in the Caribbean and most of all the cost of living is better as people will get value for their money. when people are looking for retirement options jamaica will only be a faded memory. total slackness....

Mark Oliver
12/26/2010

@mekhi x, The calculations are correct but keep in mind the size of the engine (in cc's) is used for the main tax scale. I was going to import my GMC truck with a 6.6 liter Diesel and the duty was at the high end of 194% because of the size of the engine. then secondly, the value. So you multiply the percentage calculated by the size of the engine and the value of the vehicle. For me a one year old truck would have cost me roughly US$50,000 to bring it here.

Andrea Watson
12/26/2010

What our respective Govts do best is "TAXING" they have no idea how to grow an economy so to raise funds they tax the people to death or borrow. We have high taxes, high murder rate, high interest rates, high rate of corruption, high utility rates and low growth rate. Jamaicans are abused all around by Government, banks, gunmen and the list goes on. I have become so turned offf with this place that I want to leave, I know there is no perfect place,but if I dont go how will I survive?

Ainsworth Cole
12/26/2010

I have been laughing at Jamaican people for a long time, like sheep and goats they let past and present govt treat them like fools and continues to bleed them dry. I for one will always be better off than majority of Jamaicans because I wont be paying twice for anything. When I buy my car abroad compare with a Jamaican at home I will have double the money spent left in my pocket. They will be forever poor can't buy house, pay bills and live like I do, very well off, sorry Jamaicans u like it so

mekhi x
12/26/2010

The calculations above appears to be flawed. I can't think of any reason why all the taxes and levys wouldn't be calculated on the original value of the vehicle as opposed to adding the the previous tax amount to the original value before calculating the subsequent tax or levy.

LEE WILLIAMS
12/26/2010

Definitely "taxes gone wild" and more so out of control. And it is hard to see where these taxes are well spent

Dwayne Willis
12/26/2010

The Government is like a leach, sucking every cent out of our pockets and not interested in producing their way out

Jay Brown
12/26/2010

The continue practice of imposing these huge taxes on vehicles makes no sense. Imagine my friend in the USA which earns a higher salary that I do can buy a car of US$20,000 while I pay US$40,000 for the very same vehicle.
He is left with a US$20K income which can be otherwise spent or save while I am $20K behind.
He is afford a reasonable good health service, security and a better standard of public service that I do.
So what am I really paying for?

Sonja Boyne
12/26/2010

Don't forget the other links in the vicious cycle, the banks that continue to rape you with the interest rates on car loans, again the cost of the vehicle undergoing another multiplying effect, then the banks hand you over to the insurance companies to get a piece of you with the high cost of comprehensive insurance coverage, which is mandatory once the vehicle has been financed by a lending institution.

John Brown
12/26/2010

The rape of the Jamaican consumer continues unabated by successive Admins. The 194 % tax on cars is just too high for a country with a Per Capita income of US $4800. How many of the 2.7 mil residents can afford this? Politicians love to talk about competition but what damage does this do to the consumer and the domestic economy in the long run. How do retirees afford to live in Jam.? I guess this is one of the reasons politicians need a 2 nd passport so they can go elsewhere when they retire.

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Why you pay so much for cars in Ja