Unit rate-based duty failed to achieve government revenue targets: CMTA

From left: CMTA Past Chairman Gihan Pilapitiya, Ceylon Chamber of Commerce Secretariat Rohan Casiechetty, CMTA Chairman Sheran Fernando,  CMTA Immediate Past Chairman Reeza Rauf, and Vice Chairman Yasendra Amerasinghe.
Pic by Pradeep Dilruckshana

The unit rate-based duty scheme on vehicle imports has failed to realise the government revenue targets while causing additional foreign exchange outflows from the country.

Addressing the 98th Annual General Meeting of Ceylon Motor Trader Association (CMTA),  its Immediate Past Chairman Reeza Rauf said, “I would like to ask the authorities if they have achieved their objectives in terms of maximizing the revenue collection in proportion to outflow of foreign exchange.”

Lamenting the introduction of the unit rate taxation on imported vehicles, he said, “If you import a luxury car worth of Rs 50 million, you would have been paying Rs. 250 million duty for that, but now for a Rs. 50 million valued car, you will be only paying Rs. 40-50 million as duty. 

There’s an over Rs100 million revenue loss to the country from each top-end luxury vehicle and the outflow of additional foreign exchange is the main concern for the country.”

Rauf noted that the buyers of the local market are also increasingly shifting towards purchasing top-end luxury vehicles as the price difference has significantly reduced due to abnormalities in the duty structure.  

He asserted that Sri Lankan roads will be soon flooded with top luxury vehicles in the world even surpassing Dubai. 

“With regard to this being a more transparent system, I have my doubts if the whole industry would agree when the statistics of imports and registration of motor vehicles in the past couple of months are anaylised.” 

Rauf emphasised that the new duty structure has benefitted some European and Indian brands while it was disadvantageous for most Japanese branded motor vehicles. 

“On average 85 percent-90 percent of passenger car registrations in the last four months have been vehicles below 1000 CC engines, which is shared among a few stakeholders. This also has paved the way to an influx of below 1000 cc and high-end expensive vehicles by grey importers,” he noted.  

According to him, about 60 percent-70 percent of vehicles have come into the market through grey importers with a sharp increase in the below 1000 cc category. 
He requested the authorities at least to adjust the unit rate in a fair manner, considering an average expected percentage of revenue especially on vehicles between 1000 cc to 2000cc, whilst giving the opportunity for all stakeholders to continue with their day-to-day businesses. 

Meanwhile, while welcoming the introduction of engines of EU4 standard that focused on the environment, Rauf said the availability of EU4 compatible fuel island-wide would be the main concern during implementation.

“The 95 RON Petrol and 4-star Super Diesel are available in the market. However, the CPC should certify that fuel EU4 is compatible and available island-wide,” he added. 

SML Frontier Automotive, Managing Director Sheran Fernando was appointed the new Chairman at the CMTA at the 98th AGM. (NF)