Vehicle taxation formula introduced in the 2018 budget paves the way for super luxury vehicles to flow in with the removal of the ad-valorem rate, motor traders claim. The government has failed to understand the modern day automobile world and new trends in the trade worldwide and the present unexpected situation in the motor trade [...]

Business Times

2018 Budget proposal makes way for super luxury vehicles

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Vehicle taxation formula introduced in the 2018 budget paves the way for super luxury vehicles to flow in with the removal of the ad-valorem rate, motor traders claim.

The government has failed to understand the modern day automobile world and new trends in the trade worldwide and the present unexpected situation in the motor trade has arisen due to this reason, a front line member of the Ceylon Motor Traders Association (CMTA) told the Business Times.

Citing an example he noted that the comparison of a vehicle (apart from its options) is made taking into consideration the power factor (output) and the cost of production and not the cubic capacity of an engine. There is no basis in a taxation formula based on engine capacity, he added.

He noted that it is not fair to charge the same duty for a 2,000cc Korean-made vehicle produced and purchased for US$20,000 and a European manufactured one with same engine capacity purchased at $35,000.

A European made model X with a CIF value of Rs.5 million (taxed at 130 per cent) will be charged with the same duty of a Japanese made model X with a CIF value of Rs.2 million (taxed at 300 per cent) thus depriving the government of a duty income of around Rs.7-10 million per vehicle, he explained.

Further the additional outflow of foreign exchange on an expensive vehicle does not bring in sufficient proportion of inflow to state revenue; he said adding that basically, the new policy whilst trying to close the front door had opened the rear door for outflow.

Therefore, for a fair and justifiable system of duty calculations, the taxation system has to be linked to the engine output (BHP) so that the higher end super luxury vehicle buyers will have to pay a higher duty closing tax revenue leakage of the government as well as creating a level playing field and ensuring the survival of all players in the market, he pointed out.

Concession to those who have opened LCs
Minister Mangala Samaraweera announced in parliament on Thursday, that individuals who have already opened Letters of Credit in their names to import vehicles prior to November 9 (the day of the presentation of the 2018 budget) will be permitted to clear their vehicles by paying the pre-budget duty.

According to a gazette notification issued by the Finance Ministry, the tax concession granted from the budget for brand new electric cars will be extended to cover the used electric cars which are not more than one year old.

The duty on these used electric vehicles which are not more than one year old will be reduced by around Rs. 1 million.

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