News
Foreign worker e-vehicle permit scheme riddled with irregularities: CoPF report
View(s):By Chandani Kirinde
A scheme to grant permits for the import of electric vehicles by Lankans employed abroad launched in 2022 is riddled with irregularities and suspiciously favoured two importers, a parliamentary committee has found.
A total of 913 permits had been issued to eligible individuals after the scheme began in September 2022. Of this 68% of the permits issued had been facilitated by two importers, while 30 other importers, who are also registered to import electric vehicles, got only 30% of the share. Each permit has a validity period of six months.
Pic by Priyanka Samaraweera
A decision taken to increase the luxury tax-free thresholds from Rs 6 million to Rs 12 million ($20,000-$40,000) in November 2022 for vehicles imported under this scheme led to the loss of around Rs 1,027 million ($3.4 million) in taxes on 427 vehicles that were imported, a report compiled by the Committee on Public Finance said. The report was tabled in parliament this week by its Chairman SJB MP Harsha de Silva.
The luxury tax revision had also led to a surge in the import of high-end electric vehicles such as Porsche, Audi and Tesla with the CIF value of some exceeding Rs 20 million.
The luxury tax was amended following a Cabinet memorandum submitted by the Labour and Foreign Employment Ministry which justified the change in the tax threshold on the basis that it would encourage more foreign remittances.
The Finance Ministry had not been in agreement with the proposed tax revision and had made its observations to the Cabinet. Cabinet had followed this up by appointing a joint committee consisting of the Treasury Secretary, Labour and Foreign Employment Ministry Secretary, and Central Bank Governor to study and report back. They too had not recommended a change in the luxury tax threshold, but Cabinet had used its discretionary power and given the go ahead to amend the threshold.
The scheme was launched to encourage migrant workers to remit funds through the formal banking system to help ease the country’s foreign exchange crunch and was meant for import of a vehicle for personal use. Those eligible had to have remitted foreign currency of $20,000 or more through a bank in Sri Lanka on or before December 31, 2022. The total value of the remitted foreign exchange through the banking channels was $158.12 million under this scheme.
A total of 427 fully electric vehicles at a total of CIF value of Rs 6,338 million (around $21.13 million) have been imported under the permit scheme and the Government had collected Rs 4,317 million as tax revenue ($14.3 mn) as of May 2024. Of these, a total of 311 vehicles have been registered with the Department of Motor Traffic as of May 2024 and subsequently ownership of 46 of these vehicles had been referred to a third party by paying the applicable fee.
Meanwhile, Customs had found there had been malpractices committed using this scheme and launched an investigation in which it found that third party individuals who are not permit holders have paid taxes and other charges with local currency in 124 instances and investment had been made by one person in the import of the vehicles. Subsequently the vehicles had been sold to third parties even before the vehicles were imported into the country.
The Committee also found evidence that some vehicles were undervalued to reduce the tax liability.
The validity of the scheme ended in September last year. A request to have it extended by another year by the Labour and Foreign Employment Ministry, which facilitated the scheme, till December 2024 was refused by the Cabinet.
The extension was refused given the minimal contribution of this scheme to foreign exchange reserves in comparison to the general inflow of foreign remittances by last year, revenue loss due to the increase of the luxury tax threshold limit and pressure from other sectors for the same benefits.
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