Sri Lanka to probe tax-arbitraging car assemblers

COLOMBO (EconomyNext) – The government will probe car assembly firms in Sri Lanka for alleged tax avoidance, Finance Minister Ravi Karunanayake said while creating space for similar businesses in three wheelers and motor cycles.

A committee made up of Commissioner General of Motor Traffic, Department of Commerce Director General and Auditor General, Attorney General will be appointed to investigate this matter.

There have been reports that some vehicle assembly companies, which imported parts with lower or no duty, and engaged in tax arbitrage, were connected or owned by powerful individuals connected to the Rajapaksa regime.

The government will audit these companies to ascertain whether declared value addition was taking place and taxes defaulted.

Taxes on hybrid cars will be revised, said finance minister Ravi Karunanayake, which may result in an increase in their prices.

"The present tax structure on motor vehicles has created an unhealthy disparity between hybrid and other vehicles," he said but did not specify what the revision would be.

Karunanayake said he will remove depreciation allowance for hybrid cars to prevent revenue losses to the state.

Import taxes on motorcycle and three wheeler spare parts would be removed for those engaged in manufacturing or assembling these vehicles in Sri Lanka, which analysts say could create another tax arbitrage industry, resulting in revenue losses to the state.

The five-year age limit on imported buses will be increased to 10 years to meet the needs of rising demand from the tourism sector, the finance minister said.

Tourism is one of the most profitable industries in the country.





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