Kia Motors Jamaica has put over $300 million into a parts department and acquisition of new inventory, but says the business it hopes will flow from the investment is threatened by Government's 'draconian' industry tax.
Cars are not like patties, said Dwight Moore, the president and chairman of Kia Jamaica.
Government should delay the implementation of an increased duty measure, which affects cars over two litres including the Kia Optima Sport launched by the company, last Wednesday.
"We just put in $300 million in our after-sales and service department, in addition to financing for inventory," Moore told Sunday Business at Kia's Chelsea Avenue, Kingston office, which shares the complex with his other dealership, Worldtron Limited. "Yes, most of that money will be spent on inventory," he said.
The common external tariff (CET) on motor cars and SUVs over two litres will be increased by 50 per cent or 10 percentage points to a rate of 30 per cent.
It's part of measures geared to raise J$1.95 billion as part of Government's J$19.3 billion tax package. Moore said that increased taxation on cars within an already constrained economy could actually reduce revenue collections.
draconian tax measures
"We recognise that the Government needs money but unfortunately successive governments have seen that immediate or draconian tax measures do not necessarily yield the desired response in most cases. Based on the global economic impact on Jamaica, it means that some cannot afford the things they committed to," he said.
The Optima Sport retails for J$3.6 million locally.
"We are recommending time. We say it takes four to six months to respond to cars," said Moore, noting that the auto industry was as equally sensitive as tourism to changes in tax policy.
Starting September 1, the Government will charge an accommodation hotel room tax of US$1 to US$4 depending on the size of the hotel. Initially, in May the Government proposed an accommodation tax of US$2 for properties under 50 rooms and up to US$12 for properties over 200 rooms, but reduced the rates after a sustained campaign from the hotel sector against the tax.
"In fact, the Government backed down on the tourism tax because they recognised that a number of forecasting and long-term purchases and reservations are done, so people's budgets do not just respond like that," Moore said.
"Cars are not an item that people acquire on a daily basis, so it's not like patties or telephone talk which people habitually use and adjust over time."