Sri Lanka vehicle import ban threatens 100,000 jobs, tax revenues: industry group
ECONOMYNEXT – A vehicle import ban in Sri Lanka is threatening 100,000 jobs and 350,000 dependants as well as a number of industries and services which need mobility and transport, a motor vehicle industry association has said.
The import ban is also losing the government revenue which is being raked in by assemblers through tax-arbitrage, the Vehicle Importers Association of Sri Lanka said.
“As per the calculation carried out by VIASL, around 100,000 direct and indirect employees will have to be made redundant if the ban is to continue further,” the VIASL said.
“This would mean around 350,000-400,000 dependents of these employees would be facing severe financial difficulties threatening survival.”
“Vehicle importers provide various employment opportunities ranging from accountants, sales executives, marketing executives, drivers, cleaners (and) security staff.
“Furthermore, service areas such as clearing agents, interior cleaners, mechanics, car carrier operators and service centers are directly dependent on importation of motor vehicles.”
Vehicles are a top source of revenue for the government.
Other than vehicles imported for politicians and state workers, tax revenues from vehicle imports are about three times the dollars spent as taxes are sometime around 270 percent or more.
However due to lack of knowledge of classical economics and wide beliefs in Mercantilism Sri Lanka’s policy makers blame imports rather than liquidity injections for currency troubles, and external trade is restricted.
Vehicles are a favourite target of Mercantilsit bureaucrats which ultimately worsen the budget deficit and delays a recovery, critics say.
Mercantilists in the last administration also controlled vehicles and gold imports.
Most of Sri Lanka’s economic troubles comes from a Latin America style soft-pegged central bank built in 1951. The peg has worsened after call money rate targeting was brought in taking away the limited protection offered to the exchange rate from a policy rate corridor.
Most the central banks created by the Latin America unit of the Federal Reserve or advised by Raul Prebisch the creator of Argentina, or Robert Triffin, a follower has ended up with import substitution, dollarization, re-denomination, sovereign default or a combination of the crises, critics have said.
The association said domestic vehicle assembly has quality issues as well as a loss of tax revenues.
“VIASL strongly believes that this process does not add any value to the country’seconomy and is merely designed for tax evasion and higher profit,” the grouping said.
“Evidently the government is not getting the due tax income while the foreign currency
outflow might even be greater.
“The ultimate victim in this process is the general public who is deprived of a higher quality
vehicle as they are forced to purchase a low quality Chinese or Indian product at an inflated