Initial data shows that the 2023 comprehensive overhaul of the tax and tariff architecture on the importation of automobiles is meeting its objectives, However, at least another year of evaluation is necessary before any tweaks to the formulae can be considered.
As of 15th December 2023, a total of 1,496 vehicles were imported. This total is an increase of 102 vehicles over the year 2022, and roughly even with our 2021 importation numbers.
Finance Minister Camilo Gonsalves says the preliminary data is encouraging regarding the shift from older to newer cars.
“In 2022, only three percent of all cars imported were newer than three years old. Last year, 32 percent of cars imported were under three years old. In 2023, a full 70 percent of imported vehicles were 8 years old or newer. The average age of an imported car went from over 11 years old to under eight. This was precisely what was intended by the adjustment”.
“Last year’s reform measure reduced the effective tax rate on vehicles from roughly 145%-165% to 69%-106% on average. As such, consumers were able to pay more money at the point of purchase for a newer car, but pay less in taxes at the port, and thus end up with a newer, more valuable car, for roughly the same amount of total expenditure”.
Gonsalves said in 2023 the average price of an imported automobile, at the point of purchase, rose by 52 percent, from $10,316 to $15,710. However, despite this 52 percent rise in the purchase price of the vehicle, the average final cost of a car or SUV increased more modestly, from $41,200 in 2022 to $48,600 in 2023.
In short, the average consumer paid 18% more overall for a car that was 30 percent newer and 52 percent more valuable, at the point of purchase.
Revenue to the Government on car imports increased marginally, by two percent, between 2022 and 2023. As such, the Government was able to reduce duties across the board and still maintain the revenue while improving the quality of the local vehicle stock.
Gonsalves said data suggest that our taxes and tariffs on pickup trucks are still too high, and that only persons entitled to duty concessions are choosing to buy a newer pickup under existing arrangements.
“We also do not know what impact, if any, lack of information, inflation, shipping challenges, and scarcity of some models had on consumer habits. Additionally, due to repeated extensions of the transitional period between the old and new tariff regimes, the Government allowed multiple older cars to be assessed under the previous arrangements. In 2023, the number of automobiles granted relief ballooned by as many as 200 vehicles above the usual average. However, customs data did not properly dis-aggregate those vehicles given relief because of the shift between tax arrangements versus the usual forms of relief and concessions given to returning residents, farmers, or the construction and hospitality sectors. More study is required”.
Gonsalves says government will maintain the existing arrangements for another year of full implementation, and analyse a fuller set of data in time for our 2025 budget.
