Import duty increasing on old vehicles [1]
Monday, January 28, 2008 - 18:02. Updated on Wednesday, July 22, 2015 - 10:57.
Tongatapu car dealers have mixed reactions to the new formula for calculating duty on imported vehicles that was approved by Tonga Cabinet last week. Owners of new vehicles will welcome a huge reduction on the duty rate, while importers of old vehicles might have to pay thousands of pa'anga more duty on each vehicle.
Under the new formula, the calculation of the customs duty on vehicles will be based on the cubic centimetre or cc capacity of the engine of a vehicle and not on the cost, insurance and freight (CIF) value of a vehicle when it lands in Tonga.
The new Customs Duty rates are currently being printed, and it is expected that the Gazetted rate of duty on imported vehicles will be $2 per cc, although no one is willing to confirm this rate prior to the release of the Gazette.
Spokespersons for the used car dealers, Toloke Enterprises and New Millennium Motors expected that the new formula would have a negative impact on the sales of used cars. Their presumption of a negative impact was based on the fact that they did not know details of the new formula and what the new rate was going to be, but were expecting $2 per cc.
The General Manager of ASCO Motors, Stanley Moheloa, believed that the new formula is a step forward that will encourage people to buy new vehicles rather than old ones and will resolve the issues with undervalued imports.
"It will solve the problem with invoices and it will mean that the duty on a new or an old vehicle with the same type of engine will be the same, therefore it will tempt the buyer to buy a new vehicle," he said.
Stanley said that at the moment, duty on all vehicles is 45% on the CIF invoice, plus the 15% Consumption Tax.
Lower
A simple calculation shows that under the new duty formula the buyer of a high valued car will be paying much less duty than before. If you are buying a 3,000 cc vehicle with a CIF value of $60,000. Under the old duty rate of 45%, the customs duty would be $27,000. Under the new formula, if the rate is $2 per cc, then the customs duty will be only $6,000.
The buyer of the low-valued car will have to pay more under the new system. If you are buying a 2000 cc vehicle with a CIF value of $5,000, the old customs duty would be $2,250. Under the new system, if the rate is $2 per cc, the duty will be $4,000.
Likewise, if you are buying a very old 2000 cc vehicle with a CIF value of $2,000, the old customs duty would be $900. Under the new system, if the rate is $2 per cc, the duty will be $4,000.
Stanley believes that the only people who may not like the new formula are individuals who may be given a car by their relatives overseas. The value of such a gift is very minimal, "but under this new formula, duty will be calculated based on the cc of the engine," he said.