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.

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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
price.”

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13 Comments

  1. Didn’t you see the 2nd hand market prices ??? How middle class people buy a vehicle even saving money for years to buy the dream vehicle

  2. There is widespread economic ignorance here. That is why they controlled imports in the 1970s.

    The false beliefs are among policy-makers as well as the general public. Importers are demonized. Car owners demonize people who try to get a car or a three wheeler and say what is in the country is enough.

    This country will not get anywhere. Vehicle importers are railing against a blank wall of economic ignorance.

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  3. I think the govt is right in temporarily halting imports of vehicles. The businessman are only looking for their angle.
    There are too many vehicle running on the roads causing enormous pollution and traffic jams.
    Restricting non-essential imports seems ok considering the foreign currency reserves that are swindling causing the depreciation of the rupee.
    The govt should also set an example by stopping imports of luxury vehicles for govt MP’s and ministers.

  4. Dear freinds how many people imported the cars and how many owners of the car sales … just take eg sample government allows imported and prefabrication so it’s matter of new or reconditioned vehicles are not allowed so when starting resemble these vehicles there will be same job opportunities so only few people only loosing the business day today drivers and cleaning and life will be rolled it’s good decision has took by the government

  5. we have enough of vehicles here in Sri Lanka and also why should we pay more money to Japan and we become poorer and poorer

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  6. Our roads are too narrow. Vehicles in the main towns crawl bumper to bumper. What we require is a very good public transpot system with an effective shuttle service from the station or stand to the city centrr.

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  7. Just cause some may lose jobs @ the government looze tax revenues one cannot import vehicles. There has to be a limit according to the size of the country and road facilities. Already most areas are congested with traffic and the average speed 9 KMPH. Best keep this ban for a few more years. Vehicles are not the priority of the day.

  8. What a silly argument. To earn few Rs as import duty, are we to spend our meager foreign currency to import cars? The loss of jobs are in the non productive sector of sales and marketing.

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  9. hard earned foreign currency by our overseas workers wasted on non commercial vehicles.It will be interesting to find how many of these so called employees pay EPF and how many pay income tax.

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  10. YES, It may be true about the jobs. What about the foreign exchange drain, the pollution and the traffic congestion. the government need work on improving public transport, roads an set up industries that earn foreign exchange and also provide jobs, with the private sector. Import and sales only drain foreign exchange where, I believe , only few importers are massively benefitted.

  11. In economic perspective there are cons and pros over importation of vehicles vs outflow of Currency, but restriction of import vehicles doesn’t create much more economic value as those are consumable goods but we loss tax can be compensated by import of more capital goods generate more about industry which create employment and lower cost goods and services , we can make assembly line of vehicles here and can export generate more revenue and FOREX earning make BOP strength, decline inflation, specially can purchase garment raw material and stitch and export instead of import of vehicle where can control cost too.
    In a short run we may face some financial losses and redundant employment but in the long run we may have positive economic impact would be greater, So, importation of vehicles is good decisions and future opportunities e have to manufacture or at least assembly the vehicle is must be our priority

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