Influx of luxury cars at low duty to deny state billions | Daily News

Influx of luxury cars at low duty to deny state billions

The government’s Budget 2018 which removed the ad-volerum calculation method of duty on vehicles and brought about a scenario of subsidising the duty on super luxury cars has resulted in the coffers losing around Rs 25-40 million from each of these vehicles, alleged a top official of a leading automobile import company based in Colombo.

As a result of this there has been an influx of luxury cars into the country recently of the brands such as Ferrari, Lamborghini, Porsche, Bentley, Range Rover, Mercedes, BMW and Audi etc , he said.

Confining the duty calculation on vehicles engine capacity and removing the ad-volerum calculation of duty introduced by the budget is seen as a move adopted to discourage the average citizens the chance of purchasing a car by making them expensive. However this resulted in making the super luxury category cheaper.

It is reported that many of these super luxury vehicles imported hurriedly after the relaxation of tax on them have already been cleared from the port and there are many more on the way, some by air.

The loss projected for the next 12 months based on 5,000 vehicles at an average of Rs 20 million per vehicle would be in excess of Rs100 billion. It is also the view of many in the automobile industry that it is time that this oversight is corrected without being shy about it as some of the senior policy makers also have shown their surprise over this serious issue and some say that this can even exceed the alleged loss reported in the infamous bond scandal.

A senior industry source on condition of anonymity said that apparently already over 100 super luxury cars had been cleared from the port causing losses of billions of rupees to the government and over 400 units are in shipments that will arrive in the country in the next few weeks. He also said that another alarming point is that the new system creates opportunities for siphoning out money from the country as the CIF value is now not considered for duty calculations, thus aiding money launderers and anyone who wish to send money out of the country to do so by hooking up an invoice and siphoning out money, putting pressure on the already stressed foreign reserves. 


There are 5 Comments

The government is collecting massive taxes from cars unfairly. A vehicle imported goes up by a multiple of times it import price when it is released to the owner. Only a few countries in the world has such high tax system for vehicles. In the absence of a better public transport system the public are eager to buy a vehicle to move about and keep on buying what ever vehicle they can afford. By jacking up the taxes too high people tend to buy low quality high CO2 emission , environmentally unfriendly cheap vehicles from India and China. Better quality European and Japanese are out of reach for most of the buyers. If the taxes are normalized as in the developed countries where they do not exceed 20% Sri Lankan will import good quality cars and help the environment too.

If the taxes stayed as they were how many luxury cars do you think would have been imported? Almost none or a very few. So no income for government. With this there is an influx as you say where government is still making big money out of luxury taxes. Good move by the government and tax should come further down in order make more tax revenue. We can't get rich by selling little with unrealistic taxes. Focus on volume with lower margins and government will be able to earn a lot. "You don't sell 1 bread a month at Rs.100 and make a living, instead sell 100 breads at Rs.50 and you're there.

A person who's budget for a car is 10 million for example would now be getting a better car. It is possible that if the duty was higher he may not have gone for the same car. He may then go for another car for 10 million. (That's generally how buying capacity works) By this logic there should be no tax loss to the government.

If it's money laundering, then investigate that. For the people who work hard and earn their money legitimately, especially for those who love cars this is a great opportunity. If not for these people the economy of Sri Lanka will not see the daylight anyways. If it's currency reserve you're worried then you should hope there are more and more hard working people doing legitimate work who can afford these cars. And perhaps seeing them on the road will be a motivation for anyone to work towards it. Let's think positive! Enough negativity!!

How can it be a lost? End of the day politicians have put the country into lost.For them duty free,tax free; no one speaks about that. That is the worst lost to the government. So don't speak about these 3,4 cars.

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