Imported car prices in Sri Lanka up on ‘deemed’ valuations
ECONOMYNEXT – The price of vehicles imported to Sri Lanka from Japan has gone up, after customs authorities started charging taxes on a deemed valuation, which is higher than that declared by an importer, reports said.
Sri Lanka charged high taxes from motor cars imported by ordinary people, while giving tax slashed cars to state workers, while the elected ruling class which makes tax laws have given themselves tax free cars.
In a September 22, gazette notification, authorities discontinued using values supplied by importers, which is applicable from this month.
The price of a Japanese used car will go up between 0.7 million to 1.2 million rupees based on the new valuations.
A Toyota Axio and Acqu hybrid will go up by around 700,000 rupees. The price of a Prius will go up by around 1.2 million rupees, car importers said.
Earlier importers of used cars, who compete with brand new ‘sole agents’, had complained that the prices supplied by agents over-valued and in Japan vehicles could be purchased for lower prices.
The value is based on ‘super grade’ full option units some of which are never imported to the country, they said.
Meanwhile some importers also started to bring ‘registered-de-registered cars’, which in actual practice were not used.
Second hand auction prices in Japan in part depend on the volume of vehicles demanded each month by some countries with Sri Lanka being a significant player in the segment below three years.
The prices of used electric cars for example rose dramatically after a surge of imports to Sri Lanka, importers say. After a taxes on hybrids were raised, used car prices at auction fell for about two months, they say.
The actual price paid for a car depends on the year of manufacture, mileage, condition and the number of options.
Deemed valuations which may over-value a car has can used as a tool to remit extra foreign exchange out of the country, analysts familiar with the matter say. The lack of a depreciation allowance up to three years also over-values vehicles.
The lack of a depreciation table also encouraged the import of newer cars at a higher foreign exchange cost, they say.
Sri Lanka is now facing a balance of payments crisis due to massive monetization of debt with the central bank printing 186 billion rupees to keep interest rates down, triggering unsustainable credit and imports, of which cars is only one component.
Sri Lanka’s budget deficit expanded after a salary hike and the Central Bank instead of tightening monetary policy cut rates in April, triggering a balance of payments crisis. The central bank rejected real bids at a Treasuries auction this Wednesday to defend a rate at least up to 3-months, instead of its declared intention of defending only an overnight rate through the policy rate corridor. (Colombo/Oct08/2015)