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13.08.2018 Opinion

Kotey Scribbles: The Luxury Car Tax Shenanigans

By Kotey Edwin Dzanie
Kotey Scribbles: The Luxury Car Tax Shenanigans
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See, I have tried. I have tried my very best. In fact, I have prayed on it for understanding. But it has not. It is still not and I am still trying to convince myself that this ‘luxury’ tax, makes sense. But I’m sorry, it does not make sense! Yes, not even after praying on it!

Again, it does not make sense!
It is just a means of extorting from an already heavily taxed (directly and indirectly) people.

Please indulge me for some minutes.
It is only in Ghana that the basis on which a ‘luxury’ car is being determined is on its engine capacity! I mean how? The stress is on the words LUXURY and ENGINE CAPACITY.

Luxury cars are cars which basically have been fitted with extra and expensive materials to provide or achieve a particular level of comfort at a more expensive price. Wikipedia puts it this way “a vehicle with higher quality equipment, better performance, more precise construction, comfort, higher design, technologically innovative modern, or features that convey an image, brand , status , or prestige, or any other 'discretionary' feature or combination of them.”

In summary, a luxury car is a vehicle that comes with an extra cost due to extra additions to provide some level of extra comfort due to an extra desire.

Engine capacity of a vehicle, in basic terms, is that which allows for a particular power or torque to be achieved in a vehicle. In other words, the higher your engine capacity, the more power or torque your car will produce. The power or torque produced in a car helps it traverse bad roads, or good ones with ease.

This is why one cannot use a 1.2L car on the Eastern Corridor road our president so lamented about and come out unscathed. The possibilities are that, the vehicle may get stuck, break down, or may not last as long as one has planned due to the constant exposure of the shocks to the bumpiness of the road. However, one can use the 3.5L V8 engine All Wheel Drive (AWD or Four Wheel Drive as we call it), that the president and his entourage so comfortably enjoy and still be able to make the journey with less stress as compared to a 1.2L vehicle.

Problem with the Tax
As we have established from the introduction on what a luxury vehicle is, mind you that not all vehicles which are actually ‘luxury’ vehicles will be caught by the web of this not-so-well-thought-through tax.

For example, the 2018 Mercedes-Benz CLA 250 , the 2018 Audi A4 , and the 2018 Volvo XC90 which are all luxury vehicles are not in the bracket of targeted vehicles as they all have an engine capacity of 2.0L.

To allow for some comparison on why this tax is indeed not well thought-through, mind you that the retail price of a 2.0L 2018 Volvo XC90 is $60,000 whereas the retail price for a 3.5L 2018 Kia Sorento is $28,000. This suggests that the cost of a 2018 Volvo XC90 is actually twice the cost of a Kia Sorento, and also more specked with luxurious stuff than a Kia Sorento, yet we are taxing someone who uses a Sorento. Mind you, also, that a Sorento is a mid-SUV made mainly for families whereas the 2018 Volvo XC90 is targeted for the rich. We could go on with further comparisons amongst the actual ‘luxury’ cars, but let’s end it here.

Furthermore, for a country which has loads of bad roads, not only in the hinter lands, but right in the heart of the capital, it is not of benefit to the citizenry to be taxed for using cars that allow them to be to ply the roads with ease. Our roads are so bad that, we need a high engine capacity with more torque and power to be able to travel them.

In case you did not know, people are already heavily taxed when they import cars into the country. Mind you that the government so cleverly bases its tax on the MSRP (Manufacturer Suggested Retail Price) and not on the cost at which the vehicle was bought. This makes it possible for people to pay taxes which are even higher than the amount for which the vehicle was bought. How many times, does the government want to tax us on the same thing?

Basically, the government is asking people who are able to buy cars to help travel the bad roads that government is failing to construct, to pay for the use of these vehicles when the government has failed to provide other means of transport.

In other words, government is hindering our ability to exploit new opportunities in other places of the country because our movement is being taxed!

In places like New York, where there is reliable and alternative means of transport, due to the availability of well-constructed roads and subway systems, people pay extra tax when they decide to have private cars. This of cause, helps to check pollution, unnecessary traffic etc. But mind you there is already a system in place to cater for this.

This is however not the case in Ghana. We have bad roads with incredibly bad public transport vehicles (If you have ever used the trotro available at Teshie, you will know what I mean, or the ones at La and Osu). Sometimes, one wonders how trotro vehicles get their roadworthy. The point is, government must first consider providing or making sure an alternative means of transport exists before going ahead to introduce such tax.

However, should the government still decide on taxing cars, then they should do it on the basis on what a luxury car really is and also adopt best practices as is being done elsewhere.

First, they may must understand that the market segment of luxury cars are Premium compact segment, Entry-level luxury/compact executive cars, Mid-size luxury/executive cars, High-end luxury/full-size luxury cars, High-end luxury/full-size luxury cars, and the Luxury SUV/Crossover. Government can then base on these segments to introduce different level of tax for each market segment of luxury vehicle.

Furthermore, government can even decide to use the model being used in Australia, which is they refer to as the Luxury Car Tax (LCT).

The LCT basically allows for a certain tax to be levelled against a luxury vehicle, which goes beyond a certain set cost/value, and factors in the fuel efficiency of the vehicle. In other words, the more fuel efficient your vehicle is, the less tax you pay. Meaning luxury cars with 2.0L engine capacity of the same make will pay less tax as compared to ones with 3.0L engine capacity.

Now, won’t you agree that the Australian approach is more strategic, perfectly targeted, and well thought-through than what our brethren in government are seeking to do?

We understand that the government is in a hurry to get things done, but then no one is also chasing them, hence, government must be able to reason through its policies carefully before rolling them out.

It is expected that this tax will bring in some GHS 300million a year. But then when it is public knowledge the Auditor General report for 2017 indicates financial irregularities of some GHS 1.1billion amongst government agencies, then we ask ourselves if this tax is at all necessary. Shouldn’t government be focused more on sealing loopholes within itself and undertaking value-for-money projects than seeking ways to tax us again for more money they will potentially misapply?

Ghana is a country with few opportunities to a growing population. This means, people will have to move from one place to the other in order to exploit the opportunities there is. For the government to decide to tax our movement in this not-so-clever way, it inhibits growth and development for the very people they claim they have been elected for to provide better lives.

It is by this reasoning, that we must call on the government, to rethink their decision on this needless tax that seeks to impose hardship on Ghanaians.

  • From the non-spectator, whose name is Kotey

Author: Edwin Kotey
Email: [email protected]

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