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Auto Tax Hike Puts Aston Martin Dealership On Hold


May 9, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

The government’s proposed tax hike on sport utility and luxury vehicles is putting a damper on one car manufacturer’s plans to open a dealership for a line of exotic British sports cars.

Despite interest shown by Aston Martin to open a dealership here, the prospective dealers say the local government’s proposal to hike the auto excise taxes 30% to 40% would make the endeavor financially unfeasible.

Jaguar of Puerto Rico General Manager Jaime del Valle told CARIBBEAN BUSINESS that because Aston Martin sports cars retail for more than $300,000 each, the proposed tax increase would drive the price up $120,000, driving the legendary vehicle’s cost out of range for Puerto Rico’s limited exotic car market.

"Who’s going to buy a vehicle at such a high price?" del Valle said. "The market for this type of exotic vehicle in Puerto Rico is very limited."

Meanwhile, Puerto Rico’s automobile dealers said they are willing to meet the government half way over the proposed tax increases they say will rock the island’s automobile industry.

Ramon Vega, Jr., president of the Puerto Rico Automobile Dealers’ Association, says his group is willing to accept a tax hike of 23% on sport utility vehicles (SUVs)–the island’s most popular model, accounting for nearly half of the 123,000 new vehicles sold here last year.

In an exclusive interview, Simon Sproule, vice president of Communications & Marketing Services for Aston Martin, Jaguar, and Land Rover North America, told CARIBBEAN BUSINESS that because of dealership presence of such exotic brands as Porsche and Ferrari on the island, the company was interested into opening an Aston Martin dealer in Puerto Rico.

Although no definite decisions have been made yet, the interest is there, Sproule said.

Two of the company’s brands, Jaguar and Land Rover, already have established dealerships on the island.

Del Valle said that he discussed the topic with Sproule two weeks ago and expressed his concerns over the effect the proposed excise tax hike would have on exotic car dealers locally.

"I see a very dark future for local exotic car dealerships, because the new taxes will jack up the price significantly, which will hurt sales," said del Valle. "Ironically, a luxury boat pays 6.6% in excise taxes, but a luxury car will pay 40%."

Nonetheless, del Valle sees the glass half empty, and according to him, the 2003 Jaguars will still sell for less than their competitors, even with the proposed tax hike.

"You have to see it in a positive way. In the Dominican Republic, for instance, the excise tax on a vehicle is 200%," said del Valle. "This is a reality and we have to live with it. I’m not going to close shop or move out."

Del Valle was doubtful that Aston Martin would open a dealership here if the proposed excise tax on vehicles gets approved.

The government, as part of its budget-balancing efforts, wants a hike of about 47% to raise $70 million. Dealers say the hike will force SUV sales to plummet and could lead to massive layoffs among the industry’s roughly 16,000 workers.

"They are not going to raise the revenue they intend to raise," says Vega.

However, Treasury Secretary Juan Flores said earlier he believed prospective buyers will continue to purchase SUVs, but will buy them with less-expensive options.

Following a hearing with the Senate on Sunday, Vega said dealers would seek a tax on SUVs that will be "about 85%" of the current tax on new automobiles. For the past 10 years, SUVs have been taxed at lower rates than automobile because they are considered agricultural or work vehicles.

Under the proposed tax package passed recently by the House of Representatives, hikes on SUVs would range from about $483 for a Kia Sportage to $12,120 for a Toyota Land Cruiser.

Currently, Jaguar of Puerto Rico provides service to several Aston Martins on the island, brought here by their individual owners from the U.S. mainland, said del Valle.


Sam DiMeo contributed to this story.

This Caribbean Business article appears courtesy of Casiano Communications.
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