Finance Minister changes on motor vehicle tax

The presentation by Finance Minister Audley Shaw took on a new format this year and for once tax issues were not the main theme.  The focus was instead on the stabilisation of the local economy and the intention to stay the course.  The few tax changes that were made were small in terms of size and left one wondering whether they were worth making at all.  Of course the biggest change is to the duties imposed on motor vehicles.

At all levels of cc ratings the total taxes to be paid have been reduced with the biggest reduction coming in the category 3500 cc and over.  I am sure that the used car dealers will be celebrating but I expect that it will not improve their situation.  The problem with the used car dealers business is that the price of used cars in Japan is almost the same as that of new cars. It will continue to make little sense to import a used car which will have to be sold for the same price as a new one.  It was clear that at some point there was going to be a change in the duty structure but once again I think that trying to fix one area is the wrong approach.  Reforming the entire system will allow you to set your tax rates where you want them to be and to determine which tax waivers to allow.

It seems to me that the significant reduction at the top end of the market is sending the wrong signal once again.  The cars that are less fuel efficient should have had a smaller cut while other vehicles such as electric cars and hybrids could have been reduced further even to zero.  This is an opportunity to encourage fuel consumption and we should maximize it.  The idea of giving a concession to taxi drivers in order to encourage them to upgrade to larger vehicles is a step in the right direction.   I would have liked to see the government implement a plan similar to the cash for clunkers but structured slightly differently.  If you have a gas guzzler then agree to sell it to the government, through one of their dealers, in return for receiving the concession on an imported car.  The car would be traded in upon the arrival of the car in order to help pay for the car.  The car would be stripped of its seats, tyres, glass, etc leaving the shell and the engine which would then be scrapped and exported as part of the scrap metal trade.

This would ensure that any new car imported will replace an inefficient old one.  I agree with a reduction for the rent a car businesses but I think that reducing it for everyone at this time is not the right step.  This can be done when tax reforms are implemented.