Postby Krystal Car Part Imports » October 24th, 2012, 10:34 am
The following is a letter to the Minister of Transport on how we can improve our national automobile stock and reduce traffic by allowing people tax breaks. I look forward to your comments. This is just a part of a much larger proposal which also includes reform of our public bus transport system. I iwll share the rest at a later date. Enjoy, keep comments rolling.
[i][i]Honourable Minister,
I would like to take this opportunity to write to you, participating in the nation building work that the government has continued since their election into office. I would also like to offer my appreciation of the work you and your Ministry have done so far in making the Chaguanas licensing division more efficient, implementing the system of traffic wardens in our cities and for making public transportation through PTSC more accessible to our senior citizens and secondary and primary school students.
My proposal encourages vehicle owners to replace their vehicles instead of purchasing newer vehicles that just add to the total vehicle stock in the country. The plan uses the following methods:
• Voluntary vehicle de-registration
• Tax exemptions
I propose that an ordered system of de-registration will in short:
• Encourage road going vehicle owners to keep their vehicles up to ten years without unnecessarily purchasing new ones
• Reduce significantly the population of vehicles fifteen years and older
• Greatly reduce the rate of increase in the total number of vehicles on the nation’s roadway allowing the transportation authorities to better plan for traffic development.
• Possibly develop a spin off used vehicle export industry
• Traffic policy without setting up new management divisions.
In the absence of empirical data, I would like to submit this policy suggestion as a concept that can be further investigated.
While this plan can only be a part of many more solutions in tandem to make our country’s transportation network truly cutting edge, it is lower lying fruit. I would also like to propose de-regulation the omnibus market to allow for private omnibus operators with a minimum total capacity of 500 seats to be allowed ‘route packages’ or a series of routes and times that will allow normal profitability, and provide a controlled competitive environment.
INTRODUCTION
Economic successes and the expansion of credit have allowed greater access to the ownership of vehicles to both citizens and businesses, however, our road networks appear to have not been able to keep up with our material gains. Current measures to limit automobile ownership have focused on prohibitive policies in the forms of taxes and duties levied on consumers and quota restrictions for foreign used dealers and duties rather than incentivized systems to modify the consumption patterns of motor vehicle buyers and users. Direct observation will reveal however that if these if taxation and duties are meant to restrain the trade in new and foreign vehicles then they have not achieved the desired results. Instead, it has driven up the cost of doing automotive related business and services and by extension other business services, reducing the purchasing power of the Trinidad and Tobago dollar. I would like to propose that a tax incentive system, where the government waives (with certain restrictions) value added tax and motor vehicle taxes on new automobiles and foreign used passenger vehicles, commercial vehicles and tractors, for consumers and firms who choose de-register their vehicles that are over ten years of age from the date of manufacture will serve to not only to modify buying behaviour by encouraging owners to delay purchasing a new vehicle until they are eligible for the proposed ‘automobile tax exemption’ (hereafter ‘the exemption’). I propose that this system will help in curbing the increase in the total number of automobiles on the nation’s roads as owners would choose to ‘replace’, discarding and de-registering their older vehicles to take advantage of the tax exemption. Additionally, the proposed measures can help in reducing environmental damage due to automobile emissions of older vehicles using previous technologies and promote a more modern safer fleet of vehicles on our nation’s motorways without negatively affecting the sales of new and used car dealers. I will expand on the main points of the proposed system in greater detail.
HOW THE EXEMPTION SYSTEM WILL WORK.
The entire exemption system is based on the hypothesis that just about half of the vehicles on our nation’s roads are over ten years of age from the date of their manufacture. This means that an opportunity is here to encourage owners to have these vehicles voluntarily removed from our road network in exchange for a tax break on their next new or used vehicles according to a number of conditions.
To describe the actual mechanics of the system, an individual or firm approaches the licensing office to have their vehicle de-registered (once they are the registered owner of the vehicle). The individual or company can now take that certificate of de-registration and get a clearance certificate , from Board of Inland Revenue exempting them from paying the described taxes on the purchase of a brand new vehicle or a foreign used vehicle up to 3 years old.
The vehicle still belongs to the individual or company. The Licensing Division will take the registration plates and the true and certified copy. The owners will then be given ‘D’ or ‘demonstration’ plates for a day to drive their vehicles back to their garages for storage or to the premises of a buyer, in this case a probably ‘scrap yard’ or place specializing in proposed sale and re-export of motor vehicles or parts or dismantling. The owner of the motor vehicle who participates in this exemption program benefits twice; an exemption from taxes toward the next purchase, and then some income further income from the sale of the de-registered vehicle, the combination of the value of the two will adequately compensate the owner for this choice, as opposed to a resale of the vehicle on the local used car market.
Most importantly the vehicle is now de-registered and can never be registered or driven on the roadways according to our current regulations on age restrictions.
The exemption can work as follows:
- 100% of VAT and motor vehicle tax up to an engine size of 2000cc if a locally new dealer purchased vehicle is de-registered on the 11th year from the date of manufacture.
- 50% of VAT and 100%motor vehicle tax off up to an engine size of 2000cc (or less) on a foreign used vehicle deregistered in the 11th year since its date of manufacture.
- For new and used vehicles over 2000cc both new and foreign used, purchaser will pay motor vehicle tax at the difference between 2000cc and the vehicle engine size at the prescribed rates per cc
For the system to effectively work, a number of eligibility restrictions can be described:
• The vehicle being registered must be in roadworthy condition, driven to the licensing office and presented at a licensing office for an inspection.
• The vehicle cannot be crashed or written off by an insurance company
• The vehicle must be insured.
• The current owners must have been named on the certified copy for at least 7 years prior to de-registration.
Additionally, in this plan, owners who would like to benefit from the exemptions will gain the most when they choose to de-register their vehicle by the 11th year of the anniversary of manufacture. For owners who choose to de-register after that will only lose the value of the exemption for motor vehicle taxes by 10% every year after the 11th year.
Year of de-registration
(from date of manufacture) VAT exemption towards purchase (new/foreign used) Motor vehicle tax exemption (up to 2000cc)
11th year 100%/ 50% 100%
12th year 100%/ 50% 90%
13th year 100% / 50% 80%
14th year 100% / 50% 70%
15th year 100% / 50% 60%
16th year 100% / 50% 50%
17th year 100% / 50% 40%
18th year 100% / 50% 30%
19th year 100% / 50% 20%
20th year 100% / 50% 10%
21st year or older 100% / 50% 0%
ARBITAGE
The above described system completely eliminates a chance of arbitrage, and only penalizes owners who choose to sell their vehicles that are less than 10 years in age or have not owned continuously for seven years. It also prevents an unfair access of the exemption by individuals who may own vehicles well over ten years .
TRANSFERABLILITY OF THE EXEMPTION
Persons who have not previously owned a motor vehicle (first time buyers) will not be eligible for the exemptions. Exemptions can even be made transferrable; but only from individual to individual and not from company to individual or company to company. This is to avoid unnecessary complications in compensation claims if a company chooses to give its tax exemption to an employee or contractor for example, and the employee then terminated for some reason before the end of the employees contract.
VEHICLE CLASS
The tax exemption can only be accessed for purchase of vehicles in the SAME class that of the de-registered vehicle. For example, light motor vehicles towards the purchase of another light motor vehicle, heavy for the purchase of another heavy motor vehicle, motor cycle toward the purchase of another motor cycle and so on.
BENEFITS OF THE PROPOSED POLICY
Trinidad and Tobago, like many other nations in the developed and developing word does not produce vehicles or an extensive range of automotive related technologies. This should not be viewed as a negative trade issue, as Trinidad and Tobago exports several other types of high value goods and services. Trinidad and Tobago therefore needs to import vehicles for its transportation needs. I am suggesting that we go beyond the trade considerations and consider the other positive benefits of importing newer vehicles. Benefits include:
- Safer, modern, environmentally friendly fuel efficient fleet of vehicles that can see relative savings in the government’s fuel subsidy.
- This discourages wasteful automobile purchases for both consumers and companies.
- Encourages vehicle owners to pay closer attention to maintenance as to keep their vehicles in roadworthy condition
- Foreign used automobile dealers are not unfairly treated in this system as prospective purchasers foreign used cars can also be entitled to this exemption once the car to be purchased is under 3 years old
- All benefits to the owners are exemptions: no actual cash transactions are made. This is revenue foregone by the government, but no actual cash is given, so there are negligible transaction costs.
- The exemption plan can be started for a limited period of time, for example, three years, until the objectives of reduction of the rate of the increase of automobiles on the road is achieved.
- May also spark local industry as cars and parts can be re-exported, parts re-engineered or simply re-cycled
- Encourages vehicle owners to participate in an update of the records at the Licensing Division as owners must correctly register their own vehicles under their names. This activity can be coincided with a licensing records digitization project.
- Owners can benefit both from the tax exemption and the resale of their unregistered vehicle.[/i][/i]
