Sunday July 21, 2019

Sri Lanka's 'permit' moratorium could cut $210mn vehicle imports

Oct 01, 2018 15:18 PM GMT+0530 | 3 Comment(s)

ECONOMYNEXT - Sri Lanka's moratorium on tax slashed 'permits' to politicians and state worker could reduce or shift an estimated 210 million dollars worth vehicle imports, based on officially available figures.
At least 7,000 vehicles had been imported so far this year by public servants paying on average 3.6 million rupees less than the actual duty payable on those vehicles.
Several other categories such as members of parliament, returning Sri Lankan diplomats, retiring ministry secretaries and military top brass this year have also imported fully duty free vehicles.
Most of these fully duty free permits are sold for amounts reaching a staggering 23 million rupees each and underscores the huge loss of revenue to the state.
Sunday newspapers carried a large number of advertisements offering to buy the public servants’ car permits, but Saturday’s announcement by the finance ministry may have knocked the bottom out of that grey market.
Selling permits is not illegal, but considered immoral as the purpose of granting a permit is to allow a public servant to get a vehicle at lower than the market price so that it could also be used to commute to work.
The government had shortly after coming to power in 2015 decided to abolish the permit scheme altogether but later agreed to grant a permit once in 10 years.
However, following protests and in the face of threats of strikes by government medical officers, the government caved in and restored a system which discriminates against tax payers and makes non-public servants virtual second-class citizens.
Despite the depreciation and the measures to make a car import more expensive, prices in the domestic market remained unmoved on Sunday.
Traders said this was partly due to restrictions on banks and finance companies to finance the purchase of vehicles.
The credit restriction could reduce the net imports, unless the credit system has other clients who are willing to borrow, such as real estate firms, who in turn will import building materials.
Earlier, financial institutions were allowed to loan up to 70 percent the value of a vehicle, but this amount was reduced to 50 percent from Saturday.
Considering that more than 55 percent of all vehicle imports are financed by banks and leasing companies, further drop in demand is expected in the coming weeks.
Several car dealers took out advertisements on Sunday offering their stock at prices that reflected the exchange rate a few months ago. (COLOMBO, October 1, 2018)