Vehicle permits incur a massive duty loss for state coffers
The cash strapped government is incurring a duty loss of billions of rupees as the number of luxury vehicles imported to the country on concessionary vehicle permits has risen rapidly, officials said.
The Treasury has lost over Rs. 38.5 billion rupees in potential revenues from imported vehicles due to around 15,000 of these tax free and tax slashed permits given to Ministers, Members of parliament, present and former provincial councilors and senior public sector officials, they disclosed.
The 3-year restriction on transfer of such vehicles has been lifted by the government under a budget proposal without giving any reasons.
The reduced duty prices for these vehicles were between Rs.6.5 million and Rs.9.5 million, respectively.
The motor industry sources said that this move was aimed at providing benefits for politicians and make state officials happy.
Most franchise dealers of brand new vehicles are depending on tax free and tax -slashed ‘permits’ given to politicians and state workers to keep sales up.
While taxes for ordinary citizens were jacked up, state officials were allowed to buy cars with taxes slashed. MPs and provincial council members are allowed to buy vehicles completely tax free, they added.
These permits however are sold by many state officials and politicians to ordinary citizens who use them to buy cars.
A US$ 40,000 permit can be sold at a price of Rs.8 to 9 million and US$ 30,000 permit at Rs. 1.2 million, motor traders said adding that some permits fetch a price of Rs.1.5 million.
They noted that it is an advantage for the customers to buy a vehicle from a permit because it’s cheaper than buying a duty paid vehicle.
At least 5,000 senior public servants are to be benefited annually by the government’s move of lifting the 3-year restriction imposed on transferring duty-free vehicle permits.
Around 10,000 vehicle permits have been issued by the Finance Ministry since 2010 and it plans to issue an average of 5000 permits per year in the future, a senior official of the Ministry revealed.
All senior public officers entitled to a duty free vehicle are permitted to import one in every five years.
Meanwhile the Ceylon Motor Traders Association urged the government to provide vehicle import permits to regular tax payers who pay over Rs.400, 000 as taxes annually. at the same concessionary level of 60 per cent afforded to public servants .
President of the Association Thilak Gunasekera told the Business Times that this concession should include vehicles with the maximum engine capacity of up to 2000cc.
This will encourage voluntary tax compliance, he said adding that such tax payers will not resort to the practice of selling permits like politicians and state officials.
However economic analysts were of the view that by removing the 3-year restriction under the 2013 budget the Sri Lankan government has regularized the earlier illicit practice of selling permits of duty-slashed vehicles of senior public servants and duty–free vehicles of parliamentarians to others.
The argument can be, if someone is eligible for duty-free vehicles, he can sell it, because it’s his own property. This can come handy for the people already having a vehicle or to the people who cannot afford or don’t want to afford a car. They can simply sell the permit.
The downside of the story is that this can become a business and some might start misusing it. With the political influence, if more and more people might get vehicle permits and sell those, they pointed out.
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