The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading auto dealer yesterday urged the Government to clarify whether it will levy its 7.5 per cent Value-Added Tax (VAT) at the border, warning that the tax burden will be “worse” than its initial model if it does.

Rick Lowe, director and operations manager at Nassau Motor Company (NMC), the Honda and Chevrolet dealer, told Tribune Business that the decision not to reduce Customs/Excise taxes simultaneously with VAT’s arrival “doesn’t make sense” as it would increase price of a typical vehicle by almost $2,000.

Mr Lowe said he employed a vehicle priced at $29,586 to arrive at his calculation that the post-landed price under the new VAT regime would be 7.56 per cent higher than under the previous 15 per cent model.

The Government’s initial proposal would have involved an average Customs/Excise tax rate cut of 17 percentage points, in a bid to make the impact of a 15 per cent VAT relatively ‘price neutral ‘ for goods consumers.

Using this approach, Mr Lowe said the total tax collected by the Government under its 15 per cent version would have been $24,172 - a reduced Customs duty take of $17,159, and VAT at around $7,013.

Prior to the 17 percentage point drop, Mr Lowe said the Excise Tax collected would have been $22,189. Now, under the new VAT version, some $3,883 will be added to that figure, creating a total tax burden of more than $26,000.

Once the vehicle gets past the port, 7.5 per cent VAT will then be applied to the consumer price, and “depending if that’s on the net or list price, that could be another $5,000”.

“There are too many unknowns,” Mr Lowe told Tribune Business of the latest VAT plan. “Are they going to charge it at the port? If they’re not going to charge it at the port, we may be selling it fairly close [to 15 per cent], but if they do charge it at the port, Jesus Christ, it’s going to be worse. It just doesn’t make sense.”

Mr Lowe branded the Government’s Budget as a pure “revenue grab”, pointing out that it had made no commitments to rein in, or reduce, the fiscal deficit and national debt.

“I’ll bet you a dollar that in two years at most, VAT will be 15 per cent or higher,” he told Tribune Business.

“Until you know the details you’re shooting in the dark. I don’t see much in the Budget in the way of encouragement for businessmen, investment and encouraging the contribution of entrepreneurs. It seems their main concern was to grab as many tax dollars as they can.”