Car dealers welcome withdrawal of luxury vehicle tax

Dealers in luxury vehicles in Accra have welcomed government’s decision to suspend the luxury vehicle tax, saying it would help revive their business which went under for the one year that the tax was introduced.

According to the car dealers, the tax took a heavy toll on their businesses when it was implemented such that sale of vehicles with engine capacities ranging from 3.0 – 4.1 litres and above dropped drastically, leaving the vehicles displayed at their various sales point as show pieces.

On July 29, Dr Ken Ofori-Atta, the Minister of Finance announced the suspension of the luxury vehicle tax introduced a year ago.

The tax levied vehicles with big engine capacities in line with the Sustainable Development Goals to control emissions and reduce the negative impact on the climate.

Even though luxury vehicle dealers have welcomed the latest decision by the government, they say nonetheless that it was ‘problematic’ right from its introduction.

Many dealers the Daily Graphic spoke to say customers have began showing interest in their vehicles and were enquiring of prices, something they had avoided since July 2018 when the tax was introduced.

The luxury tax

Vehicles with engine capacities of 3.0 – 3.5 litres paid an annual tax of GH¢1,000; those with engine capacities of 3.6 – 4.0 litres paid GH¢1,500 annually while those having capacities of 4.1 litres and above paid an annual tax of GH¢2000.

Government had projected a GH¢136.53 million revenue from the tax and raked in only GH¢30.19 million in the first quarter of this year.

Parliament approved the removal of the tax on August 3, 2019 as announced in the mid-year budget review.

Heavy toll

“Before the tax was introduced I could sell about 15 luxury vehicles in a month. But one month after its introduction sales dropped to the extent that I could not even sell three vehicles in a month,” the Managing Director of De-Georgia Motors and Spare Parts Limited, Mr George Dwumor said.

The Chief Executive Officer of K & K Motors, Mr Kwame Gyasi, said “a day after announcing the withdrawal, some customers came round to enquire about luxury vehicles that had been abandoned for months.”

He said further that “with customers now expressing interest in luxury vehicles, we are hoping that sales would improve.”

The Sales Manager of Tony Motors, Mr Osei Pepra, said the company had sold three 4x4 vehicles in the past one week alone, a development he described as unprecedented since the luxury tax was dropped.

Contrary to concerns that the tax affected businesses, a Sales Agent at Europa Motors, Mr Ebenezer Appiah, said the tax did not negatively affect its operations since the company did not record a drop in sales.

He was hopeful though that the withdrawal would boost demand for luxury vehicles in the coming weeks.

Positive feedback

In an interview, the President of the Vehicle and Assets Dealers Association of Ghana (VADAG), Mr Eric Boateng, said the association had received positive feedback from its members with regard to customers expressing renewed interest in purchasing luxury vehicles.

In his view, the persistent pressure the association and a section of the public put on the government played a significant role in the government’s decision to withdraw the tax.

“Our business virtually collapsed in the period the luxury vehicle tax was implemented. Responses we are receiving so far indicate that withdrawal of the tax is doing business a lot of good,” he said.