Interest rates on leases, which are used to buy cars, had gone up steadily since the last quarter of 2011 and the rupee also fell steeply in March, pressured by earlier sterilized sales of foreign exchange by the central bank.

The slowdown in car registrations came ahead of a hike in vehicle taxes by the finance ministry.

On March 31, the finance ministry raised taxes on most vehicles, a standard Sri Lankan knee-jerk reaction to balance of payments crises which are triggered when credit is accommodated and rates manipulated with printed money by the Central Bank.

The most recent balance of payments crisis was partly caused by a sudden surge in credit taken by state energy enterprises to manipulate energy prices from the second quarter of 2011.

The sudden tax hike left many hopeful car owners who had scraped together money to buy a car in great difficulty, in a graphic demonstration of the economic uncertainty that a Sri Lankan citizen suffers in the country.

Sri Lanka's ruling class of elected politicians get tax-free cars, while state workers get tax-slashed cars.

In Sri Lanka import taxes are raised through mid night gazette by rulers - literally while the citizenry is sleeping - with no consultation of the victims. Single-owner car importers had appealed to allow them to import at old prices following the tax hike.

But Treasury Secretary P B Jayasundera told reporters at a recent press briefing that the appeal could not be granted. In that case, such concessions would also have to be granted to others who imported items like milk powder, he said.

"We cannot reduce taxes on anyone. We can give concessions like more time to pay, if they have difficulties, but taxes are imposed according to a law," Jayasundera said.

"If a milk powder user said 'A 92 rupees taxes were imposed on a kilo. Give about six months until learn to drink liquid milk,' what can I say?

"For that man, 92 rupees is as big as the car tax. I do not see the principle. In the import of potatoes or anything else if we imposed taxes giving notice, you know what will happen."

Sri Lanka imposes taxes on even basic foods of people outside the budget, a practice which became rife during the 1970s, worsening the uncertain lives of the citizen.

Taxes are increased outside the budget, usually because rulers spend beyond planned allocations. Nationalist elements also mis-use taxes in the island to influence the consumptions habits of helpless citizens.

Jayasundera said though the last vehicles tax increases were done secretly in the night, with only himself and another person knowing - without the knowledge of anyone in the Treasury - some banks had back-dated letters of credit.

"There should be governance and respect for the tax system," Jayasundera said. "There should be better governance even in banks. We make taxes at mid-night because of that."

In the first quarter bus imports rose 5.2 percent to 1,184, three-wheeler imports rose 13.7 percent to 35,263, motor cycle imports rose 12.8 percent to 67,158, goods transport vehicles rose 34.7 percent to 4,288 and land vehicles rose 40.3 percent to 7,135.

Dual purpose vehicle imports rose 146.7 percent to 4,552, data released by the Central Bank showed.

Total vehicle imports rose 15 percent to 139,373 in the first quarter of 2012 from a year earlier.