Motor traders perturbed by vehicle tax formula
View(s):The government’s formula on vehicle import taxes proposed in the budget to promote the green vehicle concept has irked the motor traders countrywide.
They also protested against the budget proposal prohibiting the import of motor vehicles below the Emission Standard of the Euro 4 or its equivalent effective from January 1, 2018.
Although this is a environmental friendly proposal, Sri Lanka is still importing Euro 3 petrol. The CPC and LIOC should first import this quality petrol to enable the motor traders bring down vehicles with engines compatible for Euro 4, the said.
On the other hand, manufacturers should accept Sri Lanka’s Euro 4 standard petrol for their vehicles to export it to Sri Lanka, they argued.
Minister Mangala Samaraweera said that the import taxes on an electric car will be reduced by at least Rs. 1 million while the import tax on the high end fossil fueled cars will be increased by almost Rs. 2.5 million.
“We will also impose a special tax on super luxury vehicles with an engine capacity exceeding 2,500 cc” he said.
The new formula for import taxes will be based on the engine capacity which will minimize the revenue leakages, Minister Samaraweera said adding that this action will prevent underhand tactics of bringing brand new vehicles under the guise of used cars and under invoicing tactics.
However traders say the proposal has failed to understand the core issue of the ailing auto industry.
More focus is emphasized on electric vehicles which at present does not solve the industry issues as electric vehicles are available only with a couple of manufactureRs. This creates an opening for more unscrupulous imports, Ceylon Motor Traders Association Chairman Reeza Rauf told the Business Times.
“It’s good to have a vision to have all electric vehicles by 2040 as proposed but in reality we need to exist for the day and need to come up with realistic taxation policies for the survival of the industry which we don’t see here,” he said.
He noted that the revenue leakage was due to grey imports which are being manipulated by used car imports and not by brand new vehicles imported by franchise holders.
Whilst there is no change in cars below 1000 cc, the introduction of the smaller gap between the engine capacity and unit rate tax will increase prices of petrol cars by around Rs. 750,000 for cars in the 1500 cc range, Rs. 1 million for cars in the 1800 cc and 2000 cc range and Rs. 5 million for cars in the 2500 cc range.