What a difference tax makes
Following complaints from two car dealers after our article on August 3, which presented European Commission data on manufacturers’ recommended retail prices for a range of models, we have decided to revisit the issue.
The dealers said that the prices bore no relation to reality. In the original table from which we took the prices, although it was clear that the prices did not include dealers’ discounts, it was not clear that the prices did not include tax.
We have now procured a more detailed table, showing full model details, as well as prices inclusive of tax and exclusive of tax, both in Cyprus pounds and in euros.
The good news is that out of the six models which were the most expensive in the EU on a pre-tax basis (one Alfa Romeo, two SEATs and two Volvos), only one model now shows up as the most expensive on a post-tax basis. Moreover, that model (the Volvo S60 2.4 diesel 163HP) is in fact not sold in Cyprus, says the dealer.
The bad news is that four models that came in as the cheapest in the EU on a pre-tax basis (two Mercedes, one Opel and one Renault), are no longer the cheapest when tax is added.
Dealers’ prices differ even after tax
“Pre-tax prices are irrelevant compared with the after-tax prices and since tax varies from country to country they cannot be comparable,” SEAT’s Marketing Manager, Charalambos Papacharalambous told the Financial Mirror.
As we mentioned in our previous article, dealers are free to set their own prices.
Papacharalambous said that their offer for the SEAT Altea 1.6 is CYP 9,950, or EUR 17,088, while the SEAT Toledo is CYP 10,350 or EUR 17,775.
“These prices are on the road, inclusive of taxes, VAT at 15%, registration and road tax,” he said.
Calls for a more intelligent tax
The huge difference in tax, espectially for 4x4s and large engines, has led dealers to call for a more intelligent tax system.
Currently, cars are taxed according to cubic capacity.
“The gap between 2 litre and 2.5 is practically double the price,” Volvo’s Brand Manager Donatos Demou told the Financial Mirror.
“The tax added to a Volvo XC90 based on its cubic capacity is around CYP 13,230.”
To that is added 15% VAT, then the CYP 1,441 registration fee, then the CYP 276 road tax.
“Add to that the laded cost, the freight and insurance and our discount and you can see that there is not much left for a dealer’s profit.”
Demou is among those calling for a more intelligent tax that takes account of environmental factors such as fuel efficiency.
“Volvo is all about safety, quality and the environment and Volvo invests a lot of money to manfucture cars that are friendly to the environment,” he noted.
Demou notes that in Sweden, there are also a range of other incentives for environmentally friendly cars, such as free downtown parking, lower registration fees and lower road tax.
On the other hand, the Cyprus incentive for smaller engines is meaningless, he argues.
“For a 1.6 litre car the incentive is 10% of CYP 1,500, that is only CYP 150. For a car costing CYP 12,000 to 15,000 that is not a serious incentive,” he said.
The Cyprus tax system also means that a large-engine, hybrid car that combines fuel and non-fuel engines, and so can use less than half the fuel, is taxed the same as a 100% fuel-run car. This is the case with one of the Lexus models, for example.
Demou notes that it is not only the environment that is losing out but the government coffers too.
“If anyone analysed the performance of the SUV segment in the Cyprus market they would see that it is virtually zero because of the new tax system, so the government is losing money.”
Fiona Mullen
