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Thursday May 13th, 2021

Sri Lanka hybrid car victims ask for justice after latest unpredictable tax

COLOMBO (EconomyNext) – Hundreds of individual would-be owners of hybrid cars whose cars had already been shipped from Japan are seeking justice after the new administration suddenly raised taxes on cars in a bid to fund an unprecedented salary hike to state workers.

Sriyani Keragala, who said she represented a gathering of over 500 individual importers of cars said many of the victims were professionals and middle class individuals who aspired to have a car for years.

"I and my husband paid for the car with our Employees Provident Fund money and a bank loan," she said. "We cannot raise another one million rupees."

Hybrid cars became popular after Sri Lanka cut taxes on such vehicles, which use less petrol, and is therefore environmentally friendlier than a car of similar size.

In a budget presented on January 29 taxes were raised on hybrids leaving people who had already opened Letters of Credit high and dry and unable to clear their vehicles.

"We do not know what to do," Keragala said. "There is a lot of psychological trauma among our group. Some are having family problems because husbands and wives are blaming the other for importing the car instead of buying it from a dealer."

"We are not millionaires or business people. I worked in the IT sector. There are doctors and others who have put lifetime savings to buy a hybrid car."

Taxation without Consent

Sri Lanka’s elected rulers and bureaucrats have a habit of slapping import taxes by midnight gazette literally while citizens are sleeping.

Critics have pointed out that taxing people without consent leads to revolt and the dawn of freedom that led to the Magna Carta and the revolt against King John was also due to half a dozen taxes levied without consent.

The principle was subsequently confirmed by Edward I in 1297 following a controversial tax on wool.

The Confirmation of Charters said among other things that….for no need will we take such manner of aid, mises (taxes) or prises (assessments) assessments from our realm henceforth except with the common assent of all the realm and the common profit of the same realm, saving the ancient aids and prises due and accustomed."

In 1689 the principle was further strengthened by the English Bill of Rights, under William and Mary which promised that there will be no taxation by Royal Prerogative and that the agreement of the parliament was necessary for new taxes.

After independence from British rule, native rulers has hit citizens repeatedly with a taxes under what could be called the ‘Minister’s Prerogative’ through the deadly midnight gazette.

This budget also slapped another tax with retrospective effect sending the stock market tumbling.

Past administrations have however sometimes allowed those who opened LCs to clear their vehicles. Ex Treasury secretary P B Jayasundera used to complain that some people falsified the date of the LCs to gain tax benefits.

"Already one ship has arrived in the port and in a few days another ship with cars is due to come," Keragala said. "The finance minister has given us a meeting on the 11th but the ships would already be here.

"This is not a political issue. We are not trying to criticize the budget. We are only saying if we knew about the tax we would not have opened the LC. And because there was no such tax at the time, those who opened the LCs should be allowed to clear the vehicles."

Political Backlash

But social media sites and blogs have been buzzing with irate citizens, including those who were hoping to buy a hybrid car in the hazy future, whose dreams have been dashed. Some are already regretting having voted the new administration in.

The so-called ‘Robin Hood’ budget transferred tens of billions of rupees of resources from the rest of the population to state workers in perhaps the largest one time salary increase seen in Sri Lanka’s post – independent history.

Ironically, state workers get cars at tax slashed prices, while the elected rules themselves get tax free cars.

One graphic in a blog depicted screen capture of the character Robin Hood from a popular TV series asking for advice from the legendary ghost Hern the Hunter.

"Tell them to say Hern Protect Us’", advises the ghost. "Then tell to take a swallow of kotthamalli."

The budget also cut import taxes for kothamalli, which is a popular medicinal ingredient.

Analysts warn that giving benefits or ‘sahana’ in a budget is a mirage. Handouts have to be funded by taxes or borrowed or financed through printed money, which will result in currency depreciation and inflation.


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