Used cars on a dealer's lot in Kingston. - File Photos

The association that lobbies for used-car dealers yesterday welcomed the government's duty rebate on motor vehicles, but says that the measure does not go far enough and discriminates against dealers who may have cleared but not sold vehicles before September 10 when the arrangement kicked in.

"The arrangement that will place some dealers at a disadvantage," said Kenneth Shaw, the president of the Jamaica Used Car Dealers Association (JUCDA).

However, the move to lower the special consumption tax (SCT) on vehicles by at least 20 percentage points for nearly seven months, up to March 31 next year, was embraced by the Automobile Dealers Association (ADA), whose members operate a manufacturers' franchise.

Like other motor vehicles dealers, ADA members have experienced a slump in business, exacerbated by the global recession.

"It is a welcome gesture at this time," said Ken LaCroix, the president of the ADA, which had lobbied for what the government has described as a "stimulus package".

"We made the call for this," LaCroix told Wednesday Business.

"We are very happy for the move because business has not been good."

Under the arrangement announced by the government last week, the duty rebate applies to vehicles that arrived in Jamaica before September 10, but remained on the docks or in bonded warehouses, so that no import taxes had already been paid.

"The policy, in a nutshell, is for all vehicles that arrived in the island prior to last Thursday," the information minister, Daryl Vaz, told Wednesday Business yesterday.

"Those purchasers will benefit from the reduced SCT up to March 31, 2010. All vehicles imported after that date won't be able to benefit from it," Vaz said.

The minister added: "With an industry with 60 per cent sales down, with the level of taxes and duties that the vehicles attract, it means that the revenues for the Government have been affected."

Pre-owned cars

The JUCDA's Shaw conceded that Vaz had explained to him that the rebate would not apply to vehicles that had already cleared customs.

"Minister Vaz called me after the press conference to clarify what the package was all about - that the package is only for those in stock, on the ports or in bonded warehouses," Shaw said.

The JUCDA head explained that in the circumstances, a dealer who had imported and cleared pre-owned cars prior to September 10 will not benefit, even if he still had these vehicles on his lot.

Substantiating his charge that the new policy will create inequality in system, Shaw said those dealers who cleared their vehicles on or after September 10 would, in effect, have cheaper and therefore more competitive cars.

The early clearers, in such a situation, Shaw argued, "will have to keep their stock or cut the cost to match their (competitors') price".

The Opposition has lashed the Government's rebate as an ill-advised move that will drive consumption over production and impact on the demand for foreign exchange.

But the ADA's LaCroix, whose sector has seen new vehicle sales more than halved since the first half of 2008 when it averaged 500 per month, stressed that the request was always for a limited window and to apply only to vehicles already in the island.

Widespread importation

"The proposal was never for any widespread importation of vehicles," he said, the clear implication being that it is unlikely to negatively impact the foreign-exchange market.

At the same time, LaCroix hinted that the ADA could ask the Government to extend the initiative, depending the outcome of the current arrangement.

Used-car dealers who complain of an even deeper collapse of their sector than owner franchisees would like to see an even broader overhaul on the taxes on vehicles.

With the downturn in the economy, sector officials claim sales have dropped by as much as 80 per cent since January, although specific figures were not available.

However, for the first seven months of the year, imports from one market suffered an even bigger decline when a mere 140 pre-owned cars were imported from Japan, compared with 1,500 for the corresponding period in 2008.

"We have had cars that we had to selling below cost price," said Andrew Jackson, the principal of Jetcon Corporation and a former president of the JUCDA.

"Motor cars are severely overtaxed, so this reduction is really a good thing," he said.

mark.titus@gleanerjm.com

Kenneth Shaw, president of the JUCDA (left), and Finance Minister Audley Shaw, who will give up revenue in the SCT rebate on some pre-owned vehicles.