Several leading licenced finance companies are using creative accounting to avoid paying Value-Added Taxes (VAT) and Nation Building Taxes (NTB) on car rentals and leases, the country’s Finance Minister was informed yesterday.
“Currently, large finance companies are not subject to any taxes for offering operating leases and rent-a-car facilities. They are doing this under the guise of finance leases,” Kings Rent-a-Car (Pvt.) Limited Managing Director Kishan Perera said.
Speaking at the latest Doing Business Forum organised by the Finance Ministry, he said that finance companies were importing cars specifically for leasing and rental purposes.
He noted that many large car dealers now have their own finance companies as well.
Finance Minister Ravi Karunanayake said that he would look into the matter.
Meanwhile, Perera said that some individuals who imported vehicles through duty-free permits were leasing and renting cars without paying VAT and NBT, which, coupled with evasions of taxes by the finance companies, were costing the government. “These are depriving the government of Rs.3 billion in income,” Perera said.
If the income taxes, which these individuals do not pay, were added, Perera noted that the tax leakage could be much greater.
The 2014 Budget of the previous government removed the VAT and NBT taxes for finance leasing. It also removed VAT and NBT for vehicle imports.
“What we’re asking is that we be exempted from VAT and NBT or bring taxes on finance companies renting cars,” Perera added. Interestingly, many government departments and agencies utilize rented or leased cars sourced from certain licenced finance companies.(Chandeepa Wettasinghe)