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New tax structure to discourage motor vehicle use: CMTA

23 November 2015 03:08 am - 0     - {{hitsCtrl.values.hits}}

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The new tax structure on vehicles and measures introduced in the Budget 2016 will discourage consumers from buying or using vehicles as the government intends, Ceylon Motor Traders Association Chairman Gihan Pilapitiya said.

“This Budget doesn’t feel that good. It’s trying to discourage people from buying vehicles,” he said.

Finance Minister Ravi Karunanayake rationalized the slew of taxes by saying that there are over 600,000 vehicles in the country which contribute to congestion.

Pilapitiya said that the government might succeed in this regard.

“It’s more of a policy-based budget, so that’s a good thing. But the taxes for us have gone to the very extreme. The motor trade must be paying the highest taxes,” he said.

Pilapitiya welcomed the abolishing of permits which had distorted the market. He had earlier called for such a move, saying that public sector employees sell their permits to the highest bidder, who used the permit to import luxury vehicles. “So we were expecting duties to come down with the permits being abolished,” he said.

However, the Budget did away with the taxes for luxury and semi-luxury vehicles.

The unit rate on excise for vehicles, in addition to the current duty based on the manufacturer’s price, will include a duty based on the cubic centimetre of the engine displacement.

Pilapitiya said that such a move is not ideal, as the additional duty on an Indian made car will be the same as the duty on a premium European brand with a similar engine displacement.

The Budget 2016 has also imposed the collection of an ‘Entitlement Certificate’ for every letter of credit opened for the importation of a vehicle, with a certificate costing Rs.2,000 for 2-wheelers and 3-wheelers, Rs.15,000 for a car, and Rs.10,000 for other vehicles.

In addition to curbing imports the Budget also seems to discourage existing vehicle owners from using vehicles, as the annual emission fee was increased to Rs.5, 000.

Despite the flat rate, Karunanayake said that the emission certificate provider service will be liberated to allow more competition.

As a further discouragement of using vehicles, the annual registration fee will be continuously revised.

“Periodically, revenue license fee should have to be reviewed in accordance with road maintenance costs and environment costs with the view of enhancing Provincial Council revenue,” Karunanayake said.

He said that the used vehicles in Sri Lanka should be reconditioned and exported.

“This will enhance the motor mechanics related activities creating new employment opportunities as well. For every 20 vehicles exported by the same exporter under this scheme, a 50 percent tax credit will be given for the importation of one motor car,” he said. Further, he said that all reconditioned vehicles not yet registered should be registered by March 31, 2016 by paying a fee of Rs.1 million for cars and Rs.750,000 for other commercial vehicles.

Karunanayake said that the public transport system would instead be strengthened.

Recently, Transport Expert Professor Amal Kumarage said that a developed country is not where every citizen owns a car, but where the rich use public transport.
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