Mar 31, 2012 (LBO)- Sri Lanka has slapped new taxes of as much as 100 percent of import value on some imported cars, but raised taxes on hybrid cars at a lower rate, in a move which can reduce state revenues from automobiles this year. Sri Lanka’s ordinary citizens pay very high taxes on cars, while state workers get tax-slashed cars. The countries elected ruler class gets completely tax free cars.
The finance minister said a surge in imports of cars had created congestion in roads and a higher demand for fuel.
Sri Lanka ran into a balance of payments crisis in mid-2012 due to low interest rates and high central bank accommodated credit growth as well as credit taken to manipulate oil prices as well as general deficit spending by rulers.
A cut in vehicle taxes brought billions of rupees in taxes for the state as car purchases by citizens soared.
Sri Lanka has been plagues with balance of payments crisis from soon after independence from British rule after a money printing central bank with a so-called soft peg was created, abolishing a currency board or hard peg that kept the exchange rate stable and trade fee.
In Sri Lanka motor cars and oil imports are “usual suspects” for foreign exchange shortages.