Government’s tax hike policy on vehicle imports pays dividends
The government’s policy of increasing taxes on the importation of vehicles from time to time has paid dividends last year as it brought revenue of Rs. 96.5 billion, Finance Ministry sources said.
This was an increase of 22.9 per cent comparing to excise duty revenue from vehicle imports in 2012, a senior official of the ministry revealed.
But motor traders said that the surge in vehicle imports was due to the import of luxury cars using duty free/duty slashed vehicle permits issued to politicians and senior government servants.
The government has also increased the customs duty payable for the importation of vehicles under duty slashed permits issued to senior public sector officials.
The duty payable for vehicle imports with cylinder capacity of 1000 cc and 1600 cc has been increased by 15 per cent while a 30 per cent duty hike has been imposed on luxury cars with cylinder capacities of 1600 cc, 2000 cc, 2600 cc and 25 per cent on over 2600 cc, respectively.
Tilak Gunasekera, President of the Ceylon Motor Traders’ Association, who is also the CEO and Executive Director of Sathosa Motors Plc, told the Business Times that most of the super luxury vehicles imported under this permit scheme are Montero Sport, KIA/Hyundai SUV, BMW X 1, X 3, 520D and Audi A4 and A6.
Following the increase in CIF value of permits from the earlier $25,000 to $30,000 super luxury vehicles such as the Audi A6 and BMW X 5 also came under this category.
He revealed that an additional penal rate was imposed on permit holders when purchasing such super luxury vehicles.
Another reason for the revenue hike was the government’s action to remove the involvement of inland revenue department in handling transfer documents of duty free/ duty slashed vehicle permits, he said , adding that this procedure has been made easy for motor traders to get clearance from the department of motor traffic by paying a 10 percent levy.
These factors have contributed towards the increasing of vehicle import tax revenue last year although the motor traders suffered a loss in margins, Mr Gunasekera said.
He noted that the trend of importing vehicles using these permits will come to an end soon and the government will have to bring down taxes for the sustenance of the industry.
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, he revealed.
But this will not last long he said adding that the importation of vehicles using this facility will also come down reducing the much needed revenue for the government.