Tax Break Fails To Alleviate Concerns Of Jamaica’s Used Car Dealers

March 28, 2023

The new General Consumption Tax (GCT) policy, announced by the Government for the sale of local second-hand vehicles, has left used-car dealers wary about its practical application and the benefits it will provide to their sub-sector in the motor vehicle sales industry.

The Head of the Jamaica Used Car Dealers Association, Lynvalle Hamilton, believes that while the government is trying to encourage dealers to participate more in this sub-sector and provide critical data on this area of the industry, the GCT cannot fall below the second sale tax threshold of $12,000 or $18,000.

There have been instances where dealers were forced to sell without a profit, making it difficult to understand how the new policy will be implemented fairly.

Finance Minister Dr Nigel Clarke recently made an announcement in his 2023/24 budget presentation in Parliament regarding the formalisation of re-sale motor vehicle transactions.

Dealers will now have to pay 15 per cent GCT on the mark-up portion of the sale price of secondary vehicles instead of on the full sale cost, as now obtains. However, Hamilton is questioning how the new regime will be policed at the level of revenue collection, given how title transfers are conducted, which is the point at which the second sale tax is applied to the sale.

While the new policy may bring in more individuals into the tax net and encourage compliance, Hamilton believes that it is essential to consider the cost to dealers, to recondition second-hand vehicles that they put up for sale.

The finance minister believes that formalising this area of the industry could lead to the birth of new companies and firms in the business of trade-ins, and provide a true reflection of the contribution to the overall economy.

Under the new arrangement, individuals selling their motor vehicles will continue to pay the flat second sale fee of $12,000 or $18,000 depending on the engine size of the unit.

The motor vehicle trade-in sector lacks vibrancy, and with the number of licensed motor vehicles in the island increasing by 43 per cent between 2016 and 2022, more needs to be done to deepen the motor vehicle services sector to create jobs and reduce imports.

The new policy would address the issue of a lack of data on second-hand vehicle sales, as currently the numbers are not known across the industry.

However, it remains to be seen how the new policy will impact the used-car dealer industry, and how it will be implemented to benefit all parties involved.

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