Tax Opinion

Mar 08, 2010 (LBO) – Sri Lanka’s taxes on motor vehicles are ‘prohibitive’ and are discouraging imports and government revenues, the finance ministry has said in a report, echoing the view of the motor vehicle trade. The finance ministry in a report issued under country’s fiscal responsibility law in February said excise taxes on motor vehicles alone which had been 18 percent of the total in 2007 had fallen to 3 percent by 2009.

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 sec