Sri Lanka car 'permit' prices plunge in secondary market

Fri, 24 May 2013 02:42:05

04 Dec, 2012 07:17:30

Dec 04, 2012 (LBO) - Prices of 'permits' issued to state workers to buy tax slashed cars have plunged in the secondary market, following the effective legalization of a re-sale process, sources familiar with the market said.

The price of a tax slashed permit for an standard family sized car had fallen from about 1.5 million rupees to about 800,000, according to participants in the market.

Since the mid 1980s Sri Lanka has given completely tax free cars to elected rulers and tax slashed cars to state workers while taxing ordinary citizens to very high levels, in a perversion of just rule of law.

Many state workers then sell the 'permits' to others such as businessmen, arbitraging the difference between the tax paid and tax slashed car through an active grey secondary market.

On paper, state workers cannot 'sell' the car for three years as the motor vehicle registry do not entertain transfers of ownership, but people buy them on an understanding.

Last month Sri Lanka's rulers suddenly said state workers could sell the cars legally. But permit holders say a 500,000 rupee fee has to be paid to change the first owner.

"There is also a greater supply of permits now that honest state workers who were reluctant to sell the permits are now prepared to get rid of their permits," an industry analyst said.

"This has expanded the supply. The narrower margin of profit has also reduced interest in the permits, contributing to the fall in the price."

The tax permits have been a key channel of revenue leakages. When the state jacks up car prices for ordinary citizens, many turn to the permits, undermining state revenue.

Luxury BMW's which were selling about 20 units a month in the first quarter of 2012 tumbled after a tax hike,and then surged to 47 in August, 67 in September and 63 in October, which industry analysts believe are driven by permits.

In Sri Lanka the burden of the state which is visible is evident in the amount of taxes paid by citizens for food and items like cars.

A six to eight-year old Japanese car sells in Sri Lanka for about the same price as a US citizen pays for a brand new one.

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READER COMMENT(S)

18. Joes Apr 15

I think its better to review the permit policy and make arrangements to grant a permit for all foreign workers who send foreign exchange to Sri Lanka. Obviously, there can be a cap to the total amount sent to control the number of permit. This would increase our foreign currency deposits in the country.

17. vrw Dec 09

This is called the entitlement mindset. We are well into the information age but out mindset is still stuck in the industrial age. People is Sri Lanka (mostly government servants)believe that the state owes them the good life that they are entitled to. These are the very people who have not contributed even one cent towards State coffers.

As for permits, well what can I say? The government rewards corruption. It has put in place a system that nurtures corruption. I often wonder what SL would have been like had DS Senanayake refrained from practising nepotism and given SWRD Bandaranayake his rightful place as the leader of the UNP. Just calculate the cost of the chain of events that followed that fateful decision.

16. DH Dec 07

Sanjaya and Fefe I guess you both are top gov employees whos got the permit. So your doctor friend thinks that people who never went to university or the people who wasted the education are just a waste space?

The soldiers who died for freedom so that u can drive around in ur duty free cars, the labourer who put tar on the road u drive on, the petrol station man who puts fuel in to your car etc must pay for your permit? because they wasted the free education? is that what you are saying?

This is the biggest problem with SL uni graduates - they think they are so superior to everyone else and very same attitude is why we are one of the poorest countries in the world.

15. Free Lanka Dec 07

I'm a nikan inna state worker with a useless arts degree....and I have been blessed with a duty free permit.

Who cares about tax payers - they are fools to pay tax in SL

14. Second class 2 Dec 06

A graduate that comes out of the Sri Lankan education system owes his entire education to the tax paying people of the country. Unfortunately the ability to create value with such education has diminished over a period of time greatly due to outdated curriculums. This is quite evident in rankings and the percentage of unemployed graduates in the country.

This also means that graduates, who are employed, add less value to the economy in comparison to a graduate who spent his own money to study abroad and came back to SL. In that sense, perks such as car permits are value destroying to the economy as the general public is paying more than the utility they derive from the individual... So if you’re saying that these are given to educated people think twice... I would rather give a permit to an executive in a bank who has an economics degree from LSE than an Executive in RDA or any other government organisation.

This is due to the value addition the individual brings to the country and of course to retain them in the country. (Yes, exceptional cases may differ)

I have also heard this argument that permit holders deserve it cos they used the free education system. If they used it, it’s time for them to pay back.

Not ask for more.

This is similar to students studying from tax payers money and then carrying out a harthal asking for a job from the same tax payer. It’s very unethical and immoral. Doctors and Lecturers are not self made, they’re made by the public. The worst part is most of these people don’t even pay income tax. This means they use people’s money for their benefit and refuse to give a cent back, but ask for more.

About bank (private) staff getting 4% loans , remember this is private sector. Salary is a function of demand and supply. Banks give such facilities to retain their staff as turn over is high. Bank staff do not carry out strikes if they’re not happy with the salary , they simply leave the bank and join somewhere else. B’cos they trust their skills and knowledge. I can’t remember the last time a government employee did that !!!

We saw the lecturers on strike for Salary increment earlier, it says loads about their skill and knowledge and how much they trust themselves. I think people go in for collective action, only when they don’t trust them selves to prevail in the labour market.. and all bank staff pay income taxes as well.. I can’t remember any tax cuts in PAYE scheme

13. Second Class Dec 06

Sanjaya
Your position is the same as any racist or any system where slavery prevailed. A graduate is entitled to a special tax benefit because he worked 'harder' than anyone else and is therefore superior?

Give me a break. In any case this is not about graduates. Graduates in other countries get loans from the state and pay it back to the people.

This is about state workers and elected representatives who presume to rule over us, the poor dumb 'private sector' who wonder of wonders are somehow 'smart' enough to generate value and pay taxes for the tax spenders to have the good life.

12. Chee Lankan Dec 05

The permit was intended to be a reward. Now it has turned out to be a bribe by the government in power to the state sector worker. With this transfer permitted dishonest people (permit holder and buyer) are rewarded. This is one country that rewards dishonesty and penalises good citizens

11. Fefe Dec 05

Those who are privileged to obtain a permit are educated people in Sri Lanka. If you don't fall into this category... look back and see what you did when you get the time to study and enjoy the free education.

If someone get something... be happy for them.

10. Dr Andrew Jayamman Dec 05

While peace is there and positive forcast expecting, the direction of finacial management and fiscal activities clearly leads to the end of this nation

For the last 10 years Chinese wages has rosen 4 times , and srilankan wages has risen 2 times, andstate management hads going down the drain

Clear indication for the educated to leave the country for western havens

Really feel sad!!

9. car lovers Dec 05

SO BMW 5 series/Merc E class are not a car that rich people are going today, it is subsized "Dilidu Sahana Cars" meant for inefficient state workers who are not taking any responsibility nor doing any contribution to development of country.............

We see rich people in BMW 7 , Mercedes S class and enticing Mercedes CLS, Jaguar XJ,

8. shanka Dec 05

I am working in USA almost 12 years and send money to Srilanka more than 20 millions ( foreign exchange)to the country.So why can't I get a duty free vehicle for my family use in srilanka.

7. Sunil Jay Dec 04

I would hope selling of Permit value will come down drastically to a Rs 1 Lakh only.
I heard market is flooded with permit cars but less customers to buy.

6. Janaka Dec 04

State funds to receive for poor and citizens are robbed by High Rank privileged state workers by having the tax slashed permits,few use for actual purpose and many sell and earn in numerously and that in-turn rich who buy not pay a cent for that matter,What a game....

5. Sanjaya Dec 04

I have a good friend who is a doctor. He tells me they DO NOT get tax free permits. They get a tax concession. Further he tells me everyone gets free education. Doctors and lecturers are self made people who did not waste the free education. Those who wasted it should pay for it.

He tells me that all graduates read for their degrees. So you can not make them. They earn the degree through hard work.Post graduate degrees are even worse. I have found out this to be true. Why don't you also find out.

4. DH Dec 04

Yosi how can u compare a low interest rate private bank loan to tax free permit for the elitist gove employee?? Tax free permits to gov employees is a burden on the tax payer and the economy and blantant discrimination i.e. my job is important than urs attitude!!

The docs and lecturers education is fully paid for by the tax payer from year zero to the phds in western countries - then they go on to make millions by private practises and hardly pay any tax for that and they get a tax free permit on top?? FT is correct - it is a pervesion of the system!! the biggest Forex earners the expats and the garment industry workers - get nothing!!

3. Chee Lankan Dec 04

Most people who buy permit vehicles do so to avoid tax man. They usually sell the permit vehicle once its transferable after 3 years and buy another permit vehicle.

This way the expensive vehicle they drive is never declared to Inland Revenue. Many vehicles will remain untransferred with legal cover using power of attorneys etc etc to avoid income tax.

2. yosi Dec 04

Every sector has its own benefits an disadvantages. For example private or gov bank workers get 4% personal and housing loans. Since independence Sri Lankan gov has given more tax cuts to private sector than all the subsidies given to general publi and gov servents. So don't try to make a picture that only gov sector recives tax breakes.

1. wickrema Dec 04

If a 500k transfer fee is applicable for a transfer during the 3 years this is not inducing.

LBO - Notice the recent law allowing the MPs to transfer and sell the US50K permit -came last week.

This is the actual reason for giving the earlier benefit.