Rethink The Import Tax Structure

As our economy continues to grow, one of the most antiquated and absurd legacies of the past is the onerous tax placed on the importation of “luxury” automobiles. Presently, any automobile, less than four (4) years old, with an engine size displacement of more than 2000 CCs/2 liters is taxed at a rate of 250% over the CIF landed price in Guyana for the car, and if you want a “newish” V-6 or V-8 with an engine displacement of more than 3000 CCs/3 liters, that car will be taxed at a rate of 300% over the CIF landed price in Guyana.

If you want to drive a sporty little BMW 330i around Georgetown, be prepared to spend $164,886 USD because of the current import tax structure, and if you actually want some V-8 power from a BMW 850i, that will empty your wallet of $218,196 USD. These amounts only soar skyward as your tastes move toward more exotic cars.
We at V-PAC can think of only two words for this tax structure: idiotic and outrageous, and the need for this tax restructuring is one of the tenets of our Manifesto for People.

This antiquated tax structure may have made some sense before we became a petroeconomy. Back then, the Government was starved for tax revenue, and if only a very few citizens could afford to import a luxury automobile, then they also could afford to pay the exorbitant tax associated with it and help government coffers. What happened, of course, was that the tax was, and remains so high that it was, and remains cheaper to be corrupt than it is to be legal. Consequently, relatively few luxury automobiles have been imported and of those that have been imported, almost none of them have had import taxes paid for them.

This represents a double loss. The People are denied the opportunity to buy a luxury automobile, and the Government is out the tax revenue that could be earned from a sensible tax on luxury vehicles.

Let us recognize three important realities:

1. As our economy grows, the number of people who can afford to buy a luxury automobile will grow, and the market for those vehicles will grow; and
2. The Government will collect more money in automobile import tax revenue by levying a reasonable tax on a lot of vehicles (that will actually be paid), than it will collect by levying a massive tax against a few vehicles (that will be avoided).
3. The auto parts industry and repair industry will benefit because there will be an increased need for luxury repair parts and repair technicians.

Therefore, we propose what we believe to be the most common-sense approach to taxing the importation of automobiles. Let us impose a reasonable and standardized Excise Tax of Twenty Percent (20)% on the CIF landed price of each vehicle to be imported up to a CIF value of $150,000 USD and an additional “luxury” tax of TwentyFive Percent (25%) on imported vehicles with a wholesale price of more than $150,000 USD. This tax would be calculated only against the CIF value of the vehicle in Guyana and there would be no requirement to make calculations regarding engine displacement and additional Value Added Taxes. Not only will this lower the cost of importing luxury vehicles, but it will also greatly reduce the import costs of smaller cars as well.

Our proposal is to reduce the taxes on imported luxury automobiles from 300% to 25%. This IS a major shift in tax policy. However, when the current industry of avoiding the payment of current taxes is taken into consideration, our proposal will increase the Government’s tax revenue because our proposed taxes will actually be paid.

The incentive for corruption is eliminated, and the People gain access to a broader variety of cars to buy. Everyone wins.

Why this has not been done already remains a mystery to V-PAC.