(The following are excerpts from TB's Web site: www.tirebusiness.com) Should lawmakers keep or eliminate the federal excise tax on new truck tires that currently offers a pricing advantage to retreads?
The federal tax on truck tires should be dropped. Being primarily a new-tire dealer, it would reduce inventory costs and make my product more attractive costwise to the end-user.
Burlington Tire Service
As a fiscal conservative, I always am in favor of the repeal of unnecessary taxes. If the tax was repealed, the price of the average truck tire should go down $15-20 per tire.
I believe retreaders should respond by lowering the price they charge for truck casings. One of our retreaders buys 9.00R20 casings for $5.00, but buys 11R24.5 casings for $60.00.
If retreaders lower the cost of buying and selling the most popular sized radial casings by $15-20, then our truck customers will more easily afford new tires and retreads.
Sounds like a win-win situation to me for the entire truck tire business and the customer.
Secretary of corp.
Maynard & Lesieur Inc.
I am well aware that the potential elimination of the federal excise tax on new tires is a major issue for the retreading industry in North America. Here in Europe, there is a similar debate concerning whether European governments should be persuaded to remove Value Added Tax (VAT) from sales of retreads in order to protect the retreading industry from price competition from cheap imported new tires.
There is a strong argument in favor of saying that retreads should not be given any competitive advantages over new tire manufacturers by giving the retreading industry tax incentives.
Indeed, the retreading industry needs to be able to stand on its own two feet and survive without the help of government handouts.
There is also the argument that if VAT were removed the new tire manufacturers would find some way of reducing their prices still further.
This argument could equally be applied in reverse to the matter of the federal excise tax. If the tax were removed, would it really result in price decreases in new tires or would it result in an opportunity to increase new tire prices and be more profitable? It depends on the attitude of the tire makers toward the retreading industry.
The practical answer to the question revolves around the fact that the retreading industry needs to survive and maintain retail prices that allow retreaders to make a profit and to achieve/maintain the optimum retread/new tire balance in the market. We must also bear in mind the need to offer customers the best price-performance offering across the whole life cycle of the tire and the need to maintain the right level of quality casing availability and optimum management of scrap tire stockpiles.
Removal of the tax will clearly not help matters. Industry organizations such as the Tire Retread Information Bureau are working hard to explain the valuable environmental role retreading plays as well as its importance as an employer.
With leading tire makers claiming to support a cradle-to-the-grave concept for the truck tire market, they should not press for a removal of the excise tax if it is likely to seriously undermine the well being of the retreading industry.
Retreading Business magazine
Burgess Hill, Great Britain