Tax policy uncertainties hit local automobile sector: United Motors

Uncertainties in the country’s tax framework over the last year have hindered progress in the local motor trade industry, where the ad-hoc policies have directly impacted the core business models of the sector, automobile entity United Motors PLC said.

Pointing out that over the last year the operative environment has been “uncertain, complex, and ambiguous,” the company stated that volatility is a factor the industry has to “live with and respond to”.

“Uncertainty arises from government tax policies which are unfavourable to the motor trade industry, and the more recent import restrictions on passenger and commercial vehicles which have impacted the core of the business model of our company,” United Motors Chairman Sunil G. Wijesinha said.

In the entity’s annual report for the year 2019/2020 released this month, Wijesinha said that with the assumption of the new government that was elected last week, it is hoped the economic policies implemented hereon would be more favourable.

“We hope economic policies will be enunciated with more certainty so that we could plan and budget rather than fight fires,” he stated.

Wijesinha added that while the reduction in the multiplicity of taxes is welcome, it is hoped that the reduction of VAT and other taxes will spur demand for durable goods. 

“We are mindful that the country is facing a critical economic situation and some of the initiatives the government has taken are in the best interests of the country, but hopefully we will be able to chart a path that could still deliver your expectations,” he said, stressing that the operating system for business has become much complex than what it used to be.

Wijesinha asserted the that the industry must look at realigning itself to the new normal at at the earliest so that it is cushioned, to some extent, from the impacts that are yet to come.

According to United Motors Group CEO/Executive Director Chanaka Yatawara, the year under review (2019/2020) is acknowledged to be one of the most challenging in over a decade.

“With a GDP growth of 2.3 percent, the 21/4 attacks, and the COVID-19 implication, all resulted in the government implementing strict policies to limit imports that in turn drastically impacted the performance of the company,”Yatawara said.

For the financial year ending 31 March 2020, profits of United Motors reduced to Rs. 117 million whereas the group, consisting of Unimo Enterprises, U.M.L Property Developments, and U.M.L Heavy Equipment as subsidiaries, recorded a loss of Rs. 410 million.