Business Times

Motor trade urges tax removal on new vehicles

Sri Lanka’s new vehicles market is crumbling with poor demand owing to high tax levels of 300 to 400% which has seen prices rise sharply in some cases as much as three times of cars sold in Malaysia or Thailand, motor traders said.

They urged the government to bring down the rates in the 2010 budget with the port-war Sri Lankan economy moving into a new growth phase where automobile needs will rise the North and East.
The government can capitalize on this situation by reducing duty rates on new vehicles, and potentially see a volume-led rise in revenue, they said.

Rajieve M. Fernando, General Manager of Senok Automobiles told the Business Times that motor traders have informed the government that revenue to the state coffers would have been increased at least by Rs.25 billion with more vehicle sales if the rates of duty were adjusted. He said that while 25,382 brand new vehicles were imported in 2006, by 2008 this had dropped to 17,976.

Only 5061 brand new vehicles were imported last year, he said. He added that his company sold only 8 Audi brand new cars in 2009, compared with11 in 2008. Standard passenger cars now cost three times as much as in Thailand or Malaysia. He said that the Ceylon Motor Traders Association has made representations to the President urging him to cut down duty rates on brand new vehicle imports.

He pointed out that the revenue to the government would certainly increase if the rates of duty are adjusted downwards. Confirming the request to President Mahinda Rajapaksa, Association President Zeeniya Rasheed said the association was making representations to the government to get some remedy to their problem since June last year but no action has been taken as yet. They expect some relief from the 2010 budget with the intervention of the president, she said.

While many companies are running at a loss the bigger firms such as DIMO, AMW and Toyota Lanka were going through tough times, recording a sharp drop in sales during the past three months. Some businesses are unable to sell even five vehicles per month since people are not willing to buy vehicles at such high prices, company officials said.

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