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We should take the Government to the WTO – Duty charged on vehicles is too high!

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Tue, May 20, 2014

Editor: About a year before Otto Sam’s court ruling against his transfer to NEMO, I wrote an article imploring Vincentians who suffered a similar fate to seek redress in the court system, when their rights appear to be infringed upon by what is deemed government victimization. I wrote that article after reading about some High Court rulings in Trinidad, where three civil servants were successful in their litigation against the State, when overlooked for promotion.{{more}}

Once again, I want to make Vincentians aware that power lies within us to stand up to oppose such oppressive taxes as the 140 per cent duty levied on vehicles. The perfidious statement made by our political leaders that Vincentians do still import a lot of vehicles despite such an increase is no testament to our financial wherewithal, but more to our impoverishment as a people, as we are reduced to purchasing used vehicles. In comparison and in contrast, St Lucians were able to purchase over 400 new AUDI motor vehicles over a 10-year period, 2002 to 2012 . Additionally, they were able to buy on average 21 new BMWs on a yearly basis. These comparative figures are indicative that something is fundamentally wrong with regard to our ability, or more so, our inability to purchase new vehicles. Moreover, our political leaders should be cognizant of the fact that it is only the purchase of new vehicles that can be indicative of the health of a country’s economy and not used cars, as touted in their propagandized diatribes.

It is interesting to note that under the World Trade Organization (WTO) rules of Most Favoured Nation status, the duty permissible under the category – transport equipment is 35 per cent. To shed further light on this issue, we can use Jamaica as a case in point. In that country, the used car dealers association had threatened to take the government to the WTO dispute settlement tribunal, when duties did not fall in line with the guidelines specified by the trade body. The threatened action forced the Jamaican Government to seek a WTO waiver on the implementation of the proscribed duties specified by the trade body for a five-year period. The Government argument was that the duties on vehicles was a significant source of revenue and the Government needed such a waiver, given the precarious nature of the economy and the impending funding arrangement with the International Monetary Fund.

To highlight the egregious nature of vehicular duties in this country, we can make comparisons of vehicular prices with our neighbour Trinidad and Tobago. A new Isuzu pick up, similar in size to a Toyota Hilux, costs in the vicinity of TT$165,000 VAT inclusive. The same automatic crew cab (extra back seating) costs TT$240,000. A Ford Ranger pick-up cost around TT$263,000. Those cost amounts to EC$75,000, $109,000 and EC$119,000 respectively. A new Mercedes Benz Coupe costs TT$283,000 or a Toyota Yaris costs TT$163,000, which is equivalent to EC$126,000 or EC$74,000.

In contrast, if you were to purchase a 10-year-old “used vehicle” off the Internet for US$5,000, the cost, insurance and freight (CIF) for that vehicle would be in excess of US$7,000. Multiply that value inclusive of CIF, by 140 per cent; this would amount to a total cost of US$16,800, which when converted to Eastern Caribbean dollars amounts to EC$43,000 In addition, there is an environment tax of over EC$3,000 for each used vehicle imported.

What are the implications of this ludicrous increases in vehicular taxes to ordinary Vincentians? Sometime in December 2013, I asked an insurance executive if he had noticed anything with the stock of minivans on our roads. Before he could respond, I gave him the answer. “They are very old and battered looking!” His response was that they “had a management meeting just that week on the very said issue, where they expressed concern about stock of minivans on the road and its implication for insurance coverage.”

Commuters are the ones who are going to feel the pitch sometime in the future, as they jostle and hustle to hitch a ride with a dwindling stock of minivans. It is obvious that minivan owners cannot replace their vehicles because of the high duties levied. The imposition of such taxes are having a “crowd effect” in the economy, if one is to use economic jargon. High duties act as a disincentive for van owners and businesses in general to replace their stock of vehicles to move passengers and goods around. Inexorably, the imposition of high taxes when an economy is in flux, as is the case with us, an increase in taxes will only compound the worsening economic situation in the country.

It is difficult to determine the rationale of the Government for the increase in duties on vehicles. The simplest logic is that the Government lacks the ability to build new roadways to accommodate the increase in vehicular traffic, so it is more convenient to increase the duties on vehicles to discourage buyers. It may be a situation where our political leaders want to take us down the road of Cuba, where Vincentians are made to commute by mass transit, as is the case in Cuba. Congruently, to force us to buy bicycles where such is the preferred means of transport in Cuba, whose government had imported one million bicycles from China for ordinary Cubans to get around, some time ago.

A good case can be made out to the WTO about the stifling duties imposed by the Government on ordinary Vincentians. It may be wise to the make the argument to the trade body, that this country doesn’t have a problem with generating tax revenue, given the fact that we can waste such precious and scarce tax earnings by giving schoolchildren EC$6,000,000 in an attempt to win a referendum or EC$500 to each student upon passing five ‘O’Level subjects, including Mathematics and English. It is folly and simply erroneous to reward someone for his/her own future well-being. Moreover, it is egregious to put the vast majority of Vincentians in a state of abject poverty and more so, in such a short space of time.

Gumbsy.

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