Vehicle assembly rackets continue unabated
Several Sri Lankan motor vehicle assembly companies are still continuing to evade taxes as a result of the government’s delay in implementing the 2015 interim budget proposal aimed to crack down on such firms and collect due taxes in full from them, official sources revealed.
The government had proposed in the budget to review the value addition that these companies have made within the country in the manufacturing process and also evaluate the amount of excise duty that they have paid since the inception of the company up to now.
It was found that the declared value addition has not been made by these companies, and the due taxes will be charged from them, Finance Minister Ravi Karunanayake had asserted when he presented the budget in parliament on January 28.
According to the budget proposal, a comprehensive audit and verification process should be carried out to ascertain the veracity of details provided to the approving authorities by companies in the assembly of motor vehicles in the past few years.
A high level committee was to be appointed for this purpose consisting of the Commissioner General of Motor Traffic, Director General of the Department of Commerce, Auditor General, Attorney General and a member from the auditing sector.
But none of these proposals has been implemented up to now, a senior government official who wished to remain anonymous, told the Business Times. This was confirmed by a senior member of a motor traders’ association.
This bureaucratic bungling has deprived the government of much needed revenue running up to billions of rupees, the motor trader said, adding that the Finance Ministry should expedite the process of implementation of budget proposals, issuing necessary operational guidelines, circulars and required regulations or amendments to Acts presenting it to parliament for its approval.
Vehicle assembly rackets are being continued by businessmen who operate automobile assembly plants after importing parts from countries like Japan and China, motor traders revealed.
These assembled vehicles are sold in the local market at a price lower than the actual price with taxes, they said, adding that this fraudulent practice deprives the state of much needed tax revenue for the country.
The Board of Investment (BOI) also issues permits to import vehicle parts under an agreement that the relevant company should use 30 per cent of local components as a value addition to automobile assembly operations.
The Customs is levying a minimal tax for the importation of vehicle parts under the BOI agreement.
Motor traders alleged that in some occasions three different companies were involved in importing the engine, chassis and the body, and another company was carrying out vehicle assembly operations.
The fraudulent practice has deprived the Customs of its tax revenue on imported spare parts and also affecting genuine vehicle importers.