Thursday July 18, 2019

Sri Lanka state workers could arbitrage Rs15bn in taxes from car 'permits'

Sep 03, 2018 10:55 AM GMT+0530 | 2 Comment(s)

ECONOMYNEXT - Sri Lanka's state workers could arbitrage taxes of around 15 billion rupees by re-selling duty-slashed permits that have been given to them in the latest round, based on secondary market prices.

The tax slashed car permits a given as a neo-feudal discriminatory privilege to state workers while the ordinary man on the street is hit with massive taxes on motorcycles and three wheelers as well as cars.

The permits are selling around 2.1 to 2.3 million rupees, JB Securities, an equities research house said in a note to clients. There are an estimated to 6000-8000 such permits in the market, the note said.

Assuming only 6000 such permits were finally sold at 2.1 million apiece, state workers could arbitrage around 12.4 billion rupees. If 8,000 were sold at 2.3 million rupees, 18.4 billion rupees could be arbitraged.

While state workers were given tax free permits, small car buyers were hit with new taxes early this month in latter day 'Nixon shock' style move to solve a monetary policy problem with a real economy administrative move.

Sri Lanka which operates an unstable soft-pegged exchange rate regime has balance of payments troubles due to inconsistent policy, especially when credit growth is normalized.

In April the central bank hit the system with variety to tools to boost liquidity and pressure the currency.

The central bank also makes unsterilzed purchases dollars from the state or market participants to maintain a pegged regime (prevent the rupee from strengthening) and does not follow through with unsterilized sales when the new rupees turn into imports.

Analysts have called for reform of the peg, or abolition of the central bank in favour of a currency board or dollarization to enable free trade and stop the impoverishment of the people. (Colombo/Sept02/2018)



  1. nalin September 04, 12:47 PM

    The car permits were originally given with the following conditions and limits. The car could not be sold for five years, those who imported a car on the permit could not use a government vehicle even for official purposes during the five years and there was a limit on the c.i.f. value so that a reasonable car could be imported, but not a luxury vehicle. This should be strictly implemented.

  2. sacre blieu September 03, 11:26 AM

    Tax holidays and tax exemptions, including special privileges like these permits have , over the years been a farcical political oriented exercise. Fortune favours a few. The country is held to ransom and the majority pummeled to submission by these selfish few. Law of equitable justice and the equitable distribution of wealth is a myth here, and a joke in bad taste.

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