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Sri Lanka transport taxation needs urgent fix, experts say

ECONOMYNEXT – Sri Lankan transport experts recommend replacing the existing tax system with cost-based pricing so users pay actual costs, removing a bias that favours the rich over poor and private commuters and road users over public transport and rail.

Credit-driven demand for car imports, government reliance on vehicle taxes for revenue and long-term soft loans to build highways have led to an unsustainable fixation on private transport, says Amal Kumarage, Chairman of the National Transport Commission. 
The existing taxation system is outdated and contributes to encouraging imports of private vehicles which are clogging the roads and making mobility so inefficient that it slows the growth of the entire economy.

“We need to move away from (the present tax system) to get actual cost-based pricing so the user pays what it costs,” said Kumarage, also Senior Professor of the Department of Transport & Logistics Management at Moratuwa University.

“Let the trucker and car driver pay what it costs, and the rail passenger pay what it costs.”

Lalithasiri Gunaruwan, Secretary to the Ministry of Internal Transport, said the present tax systems favours rich luxury vehicle users over commuters who rely on public transport, especially rail.

“There’s an anti-public transport, anti-railway bias in our policy that few recognise. This ‘cars first’ policy must be corrected without delay if we are to prevent traffic congestion getting worse and slowing down economic growth.”

Kumarage said that while economists recognise the looming economic problems traffic congestion will cause, there’s not enough awareness among the public and politicians who represent them.

“We see the economic problems coming but governments like the revenue, people like to own cars, to see highways being built.”

Road user charges and electronic toll systems are needed as done elsewhere to ensure greater equity in pricing and infrastructure use.

“Today, the guy who drives a car in a remote, rural area where there is no congestion and the guy who commutes by car to Colombo in rush hour traffic competing for limited road space pay the same tax. We need to move away from that,” Kumarage said.





“Let the executive who wants to come in his car at 8 o’clock in the morning in heavy traffic pay the real cost. That’s economic rationale. That has been Singapore’s success. Economic reality must be built into transport pricing.”

Gunaruwan explained that while the highway is given free of charge for truckers and car owners, the government railway department bears the total cost of its infrastructure, making rail unable to compete with road.

Although diesel is subsidised by government, both road users and the railway pay the same price, he said.

“If you look at the pricing of vehicles – buses and trucks are not taxed, diesel is not taxed,” said Kumarage. “The highest amount of diesel is used by cars, vans and SUVs, not by trucks and buses.”

The transport experts said that if the toll charged on the newly built Southern Expressway was to reflect its cost, it would be so high that no one would use it.

 “We are taxing the poor man and giving a subsidy to the rich – because the expressway user is given the infrastructure virtually free whereas the railway traveller is compelled to pay for the railway track maintenance through his ticket,” Gunaruwan said.

“Even the bus user is paying his cost,” adds Kumarage. “Other than the (state-owned) Sri Lanka Transport Board, which for management reasons has a subsidy, private bus operations are profit making. They pay taxes. So the poor man does not get a subsidy anymore. The poor man’s travel is not subsidised.”

Gunaruwan suggests one option is introducing more tolls on roads so road infrastructure cost is built into road users’ pricing.

Or the railway infrastructure cost component be taken out and maintained separately by government just like its Road Development Authority responsible for maintenance so that only operating cost is reflected in rail ticket pricing.
 (Colombo/August 17 2015)

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