In 2007, the government had raised 17.4 billion rupees in motor vehicle excise duties. In 2008 car excise had fallen to 11.06 billion rupees and in 2009 to 3.25 billion rupees.
Sri Lanka's ordinary citizens pay high rates of taxes on imported motors cars amounting to over 200 percent in some cases, in the form of excise, import duty, value added and an assortment of other charges.
In November 2007 Sri Lanka had registered 26,100 new vehicles including 2,300 motor cars. In November 2008 only 20,500 vehicles were registered and car registrations had fallen to 965.
In November 2009 vehicle registrations had stabilized at 19,300 but cars had plummeted further to 329.
In 2008, state workers were given tax slashed cars, relegating ordinary people outside the state to second class citizens in a bizarre apartheid style move for a modern democracy. Lawmakers are routinely given tax-free cars.
Discriminatory taxation against the common people has become a feature of independent Sri Lanka with state workers and politicians also exempted from income tax.
The finance ministry said in late 2008 imports were further discouraged when the Central Bank imposed high deposit margins on letter of credits used for car imports in the middle of a balance of payments crisis.Though the margins were later dropped imports did not pick up due to a slowdown in economic activities and "still high taxation", the finance ministry report said.
At the moment tax arbitrage is also taking place through local assemblers causing further revenue losses to the state.
The motor trade had been calling for reduction in import duties to make cars more affordable.