Tax on resold used cars imported from off island - Who knew?
G.H.C Reid & Company president Olivia Reid-Gillet has shared with senators what she believes is another area in which the American Samoa Government is losing excise tax revenue, and this deals with imported secondhand cars that are resold to another buyer, who is required to pay an additional excise tax but doesn't do so.
Current law states that any person making a declaration of secondhand items - such as motor vehicles - being imported for personal use shall have the items delivered to the person without payment of tax.
The administration is proposing that a “secondhand motor vehicle for personal use” shall be subject to excise tax - which is 10%.
However, if the vehicle is converted to commercial use after it is imported, it is then subjected to the balance of the applicable excise tax, according to current law.
Another amendment proposed by the Administration is for provision - “Tax on resale of exempted items” such as motor vehicles. The current statute states that if an exempted item is resold within one year of the date it was imported or transferred for value received, the seller shall declare the sale to the ASG Treasurer and shall at that time pay to ASG the tax as cited in the law.
However, the administration is proposing to add an amendment to this provision: “For secondhand motor vehicles, the tax will be collected from the seller at the Office of Motor Vehicles before a transfer of title is approved.”
Among the family of companies owned by G.H.C Reid is Samoa Motors Inc., for which Reid-Gillet is a director and co-owner.
She was among the three business representatives called to testify Tuesday on three of the five revenue measures from the administration. One of those bills deals with amendments to excise tax for secondhand items - such as vehicles.
Under current excise tax law, pertaining to secondhand items - such as motor vehicles - is a provision which states that the rate of tax shall be 30% of the price received by the importer upon resale, or 30% of the fair market value of the item as determined by the Treasurer or his delegate, if the importer transfers the item for other than cash.
However, the administration is proposing to amend the 30% to “25%” based on the “value declared by” the importer, or “25%” of the fair market value of the item as determined by the Treasurer or his delegate.
In Samoa Motors' written statement, signed by Reid-Gillet, the company said it fully supports changing the current method of collecting import duties on used vehicles to 25% of the declared value at the port of entry versus 10% upon arrival and the other 20% when resold.
According to the company, importation duty should be based on a flat tax amount based on the model year price averages as published by the National Automobiles Association or Kelly Blue Book.
“This will eliminate any false documents used to UNDER declare the used vehicle’s value and this will increase ASG’s revenue collection substantially,” according to Samoa Motors.
The company is concerned with wording in the bill, “25% of the fair market value of the item as determined by the Treasurer or his delegate,” because “that leaves too much room for error and personal interpretation which could cost ASG revenues”.
In her verbal Samoan testimony, Reid-Gillet reiterated what she wrote in her official written English statement.
She said there are many imported secondhand cars, paying 10% import tax and when the car is resold, there’s another 20% tax that should be paid to the government, but that is not being done.
She believes the problem lies with OMV, which is supposed to report to the Treasurer that a car is resold and therefore there is an additional 20% tax to pay.
She said that for the many years this law has been in place, no one is reporting to Treasury that a car has been resold and therefore required to repay the tax.
She said collecting the excise tax at Port is much more efficient and this ensures that the government is not losing much needed revenues. “We strongly support the amendment [on second hand vehicles],” she said, adding that the government is currently losing a lot of [excise tax] revenue, because some companies are not providing to Customs the correct invoices to ensure the right tax is paid.
Local law allows a person to make a declaration that the secondhand items being imported are for “personal use”.
Samoa Motors suggests that “personal use” declaration “should be abolished altogether”, arguing that many individuals and companies import vehicles on a “regular basis” and keep declaring them as “personal use but then resell the vehicles immediately as a business transaction.
“Eliminating the ‘personal use’ declaration will provide ASG with more revenue and keep the playing field level for those in the retail business,” according to the statement, which also points out that Samoa Motors is a local Samoan family-owned company that has been in business since 1974.
“It has always been important to us to support our government and our community so we implore you (lawmakers) to please address our concerns,” said the company.