The Barbados automotive industry is anticipating a bounty after the taxing National Social Responsibility Levy (NSRL) is removed come the start of next month.
Several major car dealers today predicted that the cost of a new vehicle would fall by up to $14,000, spurring an increase in sales.
The dealerships had previously blamed the NSRL in large part for a slump in sales, after the levy was increased last July from two per cent to ten per cent of the customs duty on locally produced and imported goods.
Among them was Platinum Motors, whose general manager, Mark Hamilton, said the removal of the tax would certainly bring the spark back into the industry.
“The car industry has seen a significant decline from June last year to June this year. Although I cannot quote exact numbers, I can tell you that there has been a significant reduction in the sale of new cars. We would have seen a spurt in vehicle sales just before the implementation of the NSRL and then we would have seen a drop off afterwards,” Hamilton told Barbados TODAY, even as he stressed that the moribund economy also played a part in the slowdown in sales.
“The general state of the economy in the last two years has been a challenge at many different levels, as consumers all know. This was all part and parcel of the poor industry sales we have been seeing. So it is true that the NSRL had its impact but it is part of a bigger picture on the state of the economy,” he stressed.
Hamilton predicted that when the tax is repealed some customers could save as much as $14,000 on high-end vehicles, while approximately $4000 could be shaved off lower end ones.
“Generally speaking from what we have seen is a drop in price, which would vary from dealer to dealer and model to model. On lower end vehicles prices would be reduce by approximately $4000 while savings of about $14,000 could be realized on the high-end vehicles. So for example from our perspective the CRV would be at a high-end,” he said.
Meanwhile, Head of Marketing at McEnearney Quality Inc Rachel Pilgrim said the reduction in prices would be immediate, given the fact that the Customs and Excise Department recoups the taxes only after the vehicle is sold.
“Unlike some other products, the duties and taxes owing on new vehicles are paid by the dealer when the vehicle is actually sold; essentially they are all held in ‘bond’ by the dealers until the sale completes, at which point the duties are paid. This is good news for car buyers as it means that when the NSRL is removed, all vehicle prices will drop,” said Pilgrim, who noted that a number of ancillary charges would be reduced as a result of new regulations in the so-called mini Budget presented by Prime Minister Mia Mottley earlier this month. She however cautioned customers not to expect a straight ten per cent reduction in prices as there were other taxes introduced last year that still remain.
“It’s important to remember that ten per cent is calculated on the landed cost of the vehicle. Showroom pricing is also made up of other taxes such as excise duty, VAT [Value Added Tax] and Foreign Exchange Tax which was also introduced last July and has not been removed in the mini Budget. On-the-road costs, typically comprising road tax, licence plate, mats, tints and any other special add-ons requested, will also be lower as the cost of road tax has been reduced. So, for example, the Mazda BT-50 was selling at $115,278 and will now be $107,241, an $8000 reduction in cost,” she explained.
Since the announcement of the repeal, Simpson Motors has gone on a marketing campaign, using the removal of the NSRL as a major selling point.