Questionable practices, including under-invoicing, by some used car dealers are primarily responsible for the major decline in the "reconditioned" car market in Barbados.

That was the response of a number of the island's established automobile dealers to charges last week by used car sellers that the $4 000 environmental levy imposed by the last Government on each imported used car was a result of lobbying by new car dealers who wanted to drive them out of business.

Roger Hill, managing director of Nassco Limited, agents of Toyota, said he knew of no discussion between new car dealers and Government on the subject, while Simpson Motors general manager Debbie Simpson said their discussions with authorities over the years related to making new cars more affordable to consumers.

Evidence

He said business of importers of Japanese used cars started to collapse when evidence of massive under-invoicing was uncovered and officials of the Customs & Excise Department and the Ministry of Finance started to crack down.

"We knew that the under-invoicing was going on from very early," Hill said.

"We were the first to bring in used cars in 1994, and we could tell because the other people were buying from the same places as us, but they were quoting lower prices to customs – as much as $10 000 and $12 000 less."

Hill said that with the assistance of the Toyota Corporation in Japan, they were able to track some of the vehicles by engine and chassis numbers, and discovered they had been bought from a number of dealers in Thailand and shipped to Barbados.

In one case, the certified invoice from the Thai agent showed the vehicle had been bought for 846 000 bahts [the official currency of Thailand], approximately US$25 000, while the value declared to customs in Barbados was US$10 000.

"Practices like that caused the authorities to scrutinise everyone with a fine-tooth comb, and many of them could not make the kind of profits they were making before," Hill added.

McEnearney Quality CEO Mark Hamilton agreed, charging that "rampant manipulation of invoices by some dealers" made it impossible for his company's used car division CarMax to compete with used cars they had also imported from Japan. CarMax now trades entirely in local used cars.

"I can pull a file for you to show the many instances of invoice manipulation by some of these dealers that we have been able to uncover . . . ," he said, "but when the story is told it is always that we are big business trying to run the small man out of the trade . . . . "

The new car dealers also referred to a study of the industry, which was undertaken by Barbadian Elizabeth Andrew-Rose of St Lucian firm Tudor Enterprises Limited, which revealed that under-invoicing was so rampant that while the number of cars imported grew by the thousands, revenue to the Treasury declined annually by millions.

Duties paid

In 1997, the report stated, 2 606 new cars were imported. This climbed to nearly 2 800 by 1999, but declined to 1 238 in 2003.

On the other hand, used car sales moved from 2 763 in 1997 to 4 212 in 2001 and dropped to 2 360 in 2003.

However, while the total duty paid in 1997 on 5 369 cars was $103 million, in 2003 Government was able to collect a mere $79 million from nearly 3 600 cars, the bulk of it from new cars the sales of which had been cut by more than half.

Used car sales jumped back to 3 226 in 2004, outstripping new car sales, but the decline in duty paid on used cars continued, industry sources revealed.

Former Deputy Prime Minister Mia Mottley, now Opposition Leader, said before leaving office her administration had reviewed the impact of the environmental levy on the used car market and concluded it had a dampening effect on business not anticipated.

"Before we left office we had agreed to reduce the levy to $1 500 per vehicle [down from $4 000] . . . . We remained extremely concerned about the very serious and rampant practice of under-invoicing by some dealers," Mottley said. "It was costing the Treasury heavily."

Hill said he believed there was still a demand for used cars since many Barbadians couldn't afford new vehicles. He said that Government should put more stringent rules in place before facilitating any resurgence. There should be limits on the models imported to protect consumers in the area of after-sales service.

Simpson said her company's position was that consumers would be better served by reduced duties on new vehicles to make them more affordable.

Last week Prime Minister David Thompson revealed that Government was reviewing the state of the used car business. (CM)