Import tax makes vehicles unaffordable for middle class

The government’s decision to maintain a 200% tax on vehicle imports represents a policy failure in terms of meeting the needs of middle-income citizens seeking to affordably purchase a vehicle, according to Co-President of the Vehicle Importers Association of Lanka (VIAL), K. Deekiriwewa.

“Trying to save foreign exchange is only one aspect of this issue. Sales of cars have dropped by as much as 80% as a result of the government using the maximum duty possible and this has put the idea of owning a vehicle completely out of reach to the average citizen.”

“The government must understand that if they need to conserve foreign exchange there are other more balanced means of doing so. They must look at this issue from a broader perspective. As traders we always have the option of doing the same business elsewhere or diversifying into other fields. Besides the fact that our business cannot survive like this, the general public simply cannot afford to purchase a vehicle of good quality at a reasonable price any longer and that is something the government has to answer for., Deekiriwewa said.

Whilst requests made from VIAL to lower duties were disregarded by the government in Budget 2013, a further 85% tax, or Rs.75,000 fee was added to motor cars under 1,000 cc, a segment which had enjoyed strong sales prior to the duty increases.

Car imports by the end of October plunged by 70% from its peak, according to information analyzed by JB Securities (Pvt) Ltd, following a fiscal tightening package aimed at curbing imports at the start of this year.

Notably, 40 new registrations of BMW 520D vehicles also took place last month, many of which were reportedly purchased through the utilization of duty free permits. In total, 93 luxury cars, across the brands BMW, Mercedes Benz and Audi were purchased in October alone.