Small-time vehicle importers who had opened their Letters of Credit (LCs) prior to the January 29 interim budget have written to President Maithripala Sirisena calling for relief, due to their inability to pay the additional charges ranging between Rs.0.7-1 million brought on by the hybrid tax.

“We wish to highlight that we are middle class people and are self-employed. We too make a significant contribution to the national economy. It would not be just to categorize as large-scale vehicle importers and band us within the fold of the capitalist class,” the Small-Scale Vehicle Importers’ Association stated.
The small-scale importers open LCs for around five vehicles or less at a time, depending on the bank borrowings taken against collaterals to finance their imports.

Due to their small margins and lack of economies of scale, they are now left in a hopeless predicament, facing the confiscation of their imports due to their inability to pay the taxes.

Reports say that nearly 3,000 vehicles are being held in the Hambantota Port awaiting clearance. The association said that the voices of individual importers were heard and they were given relief, while the appeals of the small-scale importers were lost in the government hierarchy.

The tax could also have long-lasting impacts.

“Importers who carry a big stock of previously imported vehicles will have the advantage of quick disposal of at a competitive price. The pace of our sales will thus slow down until the market gets attuned to the new prices. This would add to our cost of finance,” the statement further added.

The association also said that the annual tax of Rs.1.5 million imposed on automobile importers would create a cartel environment, as only larger scale importers would be able to afford paying it.

“We consider that this measure is not compatible with the policy of rectifying the anomalies in the distribution of wealth of our country.”

Therefore, the association reasonably called for a removal of additional taxes on vehicles for which LCs were opened before January 29.

It also called for the removal of the annual tax, to implement tax concessions on depreciation value basis, to formulate  a more equitable basis of tax on hybrid vehicles and to extend a demurrage concession due to delay in releasing of vehicles.