Excise Department hoping to scrap remaining first-time car buyer scheme
More than 14 months after interested persons were required to register for the governments’ first-time car buyer scheme, around 120,000 customers are still awaiting the delivery of their vehicles.
The Excise Department believes now is the perfect time to scrap the scheme and it plans to conduct talks with motor dealers about implementing this measure as a cost-cutting exercise for government coffers.
The populist policy has largely backfired on the government with numerous reports suggesting that substantial numbers of the 1.25 million people who registered for the scheme and have taken delivery of their vehicles, are either failing to keep up the payments or have illegally on-sold their cars, even though they are required to keep them for a minimum of five years after delivery.
There are no hard and fast figures to confirm these currently anecdotal rumours, but what is definite is that household debt stood at a whopping 80.1 percent of Gross Domestic Product (GDP) in the third quarter of 2013. Much of this was attributed to the financial burdens imposed by the first-car buyers scheme. By way of comparison, household debt stood at 56 percent in 2008.
At the time it was announced, a number of economists suggested the scheme was deeply flawed, and, apart from leading to greater personal debt in the long term, it also distorted the car market.
These economists claimed the populist scheme removed what is termed future demand and replaced it with artificial demand. The end result has seen quite dramatic drops in the prices of second-hand cars since the market is now flooded with these vehicles.
It has also put much greater pressure on the new car market as well, with reports suggesting sales have been lower than expected over the past 12 months or so.
The Excise Department believes cancelling around 100,000 reservations for the 100,000 baht tax rebate available for those registered for the car scheme, will obviously save a substantial sum from being drained out of the governments’ coffers but should be undertaken since sufficient time has passed and the department wants to reconcile its accounts.
The government did not set a deadline for final delivery, the only deadline was that of registration for the scheme, which was 31 December 2012. So far, about 1.1 million people have taken delivery of their vehicles and 845,000 of these owners have received the tax rebate.
The Excise department expects another 20,000 or so vehicles will be delivered in coming months but hopes dealers will agree to scrapping the scheme and cancelling around 100,000 orders. So far, more than 60 billion baht has been paid out in rebates.