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    Tax reform raises the cost of buying and owning a car

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    To own or buy a car will be much more expensive if the “Solidarity Tax” bill passes. The bill was presented by the government last Monday to the Legislature and the plan proposes an increase of 10 percentage points in the selective consumption tax and a rise of 2.5% to 3% transfer tax on vehicles. The plan also proposes an increase from 13% to 14% sales tax.

    In vehicles, tax is calculated as a cascade, therefore, the increase in the selective effect on the calculation of other items that are then used to estimate the sales tax and the increase ends up being higher. For example, a Toyota 2004 would have an increase in taxes of almost ¢350,000.

    “The tax is completely transferred to the consumer… A 10% increase in the selectivity can be transformed into a 14% increase in the sales price,” says Guillermo Charpentier, manager of Veinsa, an importer of Mitsubishi cars.

    To the extent that the tax increase raises the price of cars, it will also increase the base on which other taxes are charged, like the transfer (which also raises the price) and vehicle ownership, said the lawyer Alan Saborio.

    Smith said Monday that the tax plan aims to increase tax revenues by about ¢500,000 million and the original idea was to increase the sales tax (which becomes the plan in a value-added tax) from 13% to 15% . However, the government caved in to propose a sales tax increase from 13% to 14% in exchange for increasing other taxes, such as vehicles.

    In the preamble to the plan, the Ministry of Finance said that with the increase in the excise tax would raise an amount equal to 0.10% of gross domestic product, which would be about ¢20,000 million.

    So far it has not been possible to obtain the estimated data collection by the increase in the tax on the transfer of vehicles.

    Association complains. Lilliana Aguilar, executive director of the Association of Vehicles and Machinery Importer (Aivema), said Tuesday that current taxes on vehicles are already quite high, and to elevate them more could cause the vehicles to become “confiscated,” which contradicts jurisprudence of the Constitutional Court.

    Therefore, she promised to give a strong battle in the Legislature.

    She added: “Furthermore, the sector faces the problem of too many open legislative investigations with vehicle taxes.”

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