Tax on new cars tipped to rise 20pc

THE first registration tax on cars is likely to increase 20 per cent, says Motor Traders Association chairman Mike Rushworth.

Mr Rushworth said Financial Secretary Sir Hamish Macleod would probably raise the first registration tax on cars when he delivered his Budget next week.

Some industry figures speculate that the tax will be increased by up to 100 per cent, but Mr Rushworth reckons 20 per cent is the most likely figure.

It would certainly not be the first time the Government has made such a move.

In 1982 the Government increased the tax by 100 per cent, according to Dodwell Motors marketing manager Terence Cheng.

This resulted in a 50 per cent drop in new registrations in 1983.

Mr Cheng said the Government would need to consider the magnitude of the increase and the effect it would have on new car sales.

''If the tax is large, say 200 per cent, obviously the effects will be very serious,'' he said.

Mr Cheng said the Government needed to take a longer-term view of traffic planning, and increasing the registration tax was not the only way of countering congestion problems.

''The Government also needs to look at how it manages lorries and commercial vehicles,'' he said, adding that it was unfair to penalise private car owners.

The Government may also increase the yearly registration tax on vehicles. Such fees now range from $4,000 to $12,600 a year, and an increase may have the effect of removing some older cars from the road.

In recent weeks, the Government has been making noises about increasing the first registration tax as a means of easing traffic congestion.

On January 27, Transport Commissioner Rafael Hui Si-yan said traffic jams in the city centre were a big problem and the Government could take action through taxation.

Motor dealers, predictably, are not pleased with the idea.

As chairman of the Motor Traders Association, Mr Rushworth represents 36 car manufacturers and 22 distributors in the territory.

He said that raising the tax would be premature given that the Government was in the final stage of enacting a new registration tax bill to replace the existing one.

Under the current system, new car buyers have to pay a one-off tax on the first registration.

The amount of the tax depends on the size of the engine, but is about 120 per cent of the cost, insurance and freight (cif) price.

Industry insiders said that while most car dealers used the correct cif price on which to base the tax calculation, the system was open to abuse by unscrupulous salesmen.

The new bill, which is expected to be passed on March 23, will replace the old system with a tax based on the selling price. In effect, it is a value-added tax.

Mr Rushworth said this system would be fairer because it would be more difficult for dealers to lie about the selling value.

''We want a level playing field,'' he said.

Under the new system, the registration tax would be between 40 per cent and 60 per cent of the tax-free sale price, depending on the size of the engine.

''A Mercedes-Benz would attract a tax of 60 per cent, while a smaller run of the mill car would probable be taxed at 40 per cent,'' said Mr Rushworth.