Tax Effects

Feb 19, 2013 (LBO) – Sri Lanka’s registrations of BMW luxury cars rose 280 percent in January 2013 from a year earlier following changes to taxes while new registrations of small Maruti/Suzuki models plunged 84 percent, data compiled by an equities research house show. Monthly data from Sri Lanka’s motor vehicle registry compiled by JB Stockbrokers research shows that registrations of brand new BMW cars rose to 281 percent to 84 in January 2013 from 22 a year earlier with 82 being 5-Series models.

Registrations of brand new Mercedes cars rose 109 percent to 23 percent in January 2013 from a year earlier.

Sri Lanka hiked taxes on cars in the first quarter of 2012, in what some analysts and the International Monetary Fund said was an inappropriate policy response (Sri Lanka trade controls take IMF by surprise).

Sri Lanka’s exchange rate came under pressure and imports surged due to tens of billions of rupees printed (central bank credit) to sterilize foreign exchange sales, during a credit bubble worsened by loans taken to manipulate energy tariffs.

At the time analysts warned that the move would deprive the state of tax revenues.

Though taxes on ordinary citizens’ c