Used car dealers association: Tax breaks on e-cars will only help the rich

THE budget promise of tax-breaks on imported electric cars will benefit only the rich, Used Car Dealers Association head Visham Babwah told Newsday on Tuesday.

Finance Minister Colm Imbert said on Monday he'd reduce the country's carbon footprint, saying, "I propose to remove all custom duties, motor vehicle tax and value-added tax on the importation of battery-powered electric vehicles with an age limit on imported used battery powered electric vehicles of two years."

Babwah was totally unimpressed. He said the new tax-exemption will apply to only near-new cars (no older than two years) which only the wealthier people could afford. He complained that the people in the middle and lower income brackets would be left behind as the cars they could afford which might be say four years old would not qualify for Imbert's tax-break.

Babwah warned these more costly newer vehicles would demand more of the country's scarce foreign exchange than the older and more modestly-priced cars.

He said Imbert's proposal left consumers worse off than a more embracing plan the minister had shelved a year ago, due to a sunset clause on the legislation.

Babwah said previously, electric cars up to four years old could be imported tax-free, so benefiting the middle and lower brackets. He said that ended on December 31, 2020, he related, only to now be partially revived but only to favour the wealthy.

The Value-Added Tax Act, schedule two, in section 10B had zero-rated both a new electric vehicle of 179 kilowatt engine size plus a used electric vehicle of similar specs "which is not older that four years from the year of manufacture" if imported from 2015-2020.

Babwah said like VAT, tax-breaks for customs duties and motor vehicle tax, had also previously having benefited those buying cars up to four years old, but not now.

He lamented some business leaders were praising Imbert's proposal but did not understand the local auto import industry.

Babwah said the Japanese and Korean car-makers have very few electric cars on offer but most were in fact hybrids. He lamented that Imbert had removed the tax-break from all the hybrids to now give only to the electric cars, the latter being typically $1 million cars of the high-end brands Porsche, BMW, Mercedes-Benz and Audi.

Without tax-breaks, he said someone could typically pay taxes worth 150 per cent of the car's initial cost.

He said the new tax-breaks would benefit new car importers. Regarding the drain of foreign exchange, he said the price of a new car was roughly 2.5 to ten times the cost of a foreign used. A car four years old was typically two-thirds of the price of one that was four years old, with a Nissan Leaf respectively priced at about $19,000 and $25,000.

With foreign-used importers limited to a quota, he said some operators had as few as nine cars to sell.

"Many are in a shut-down mode right now," he lamented.

Saying he had pioneered the industry in 2012, Babwah called for collaboration between dealers and the Government, on aspects like incentives and the provision of charging ports nationwide.

Imbert proposed his tax-break on electric cars to begin by January 1, 2022 and to be reviewed after two years.