Duty free permits

There is a huge controversy surrounding the duty free vehicle permits issued to MPs, in the backdrop of revelations that most of them had sold their permits to wealthy businessmen.

The whole issue is one vicious circle. First, under the proportional representation system, a prospective MP has to engage in propaganda activities in the whole district, as opposed to the electorate under the first past the post system. Most MPs cannot afford to spend millions on their own, so they resort to lending from individuals and banks. Once elected, they have to pay their loans and/or do favours for their funding sources.

This is where the car permit comes into the picture. A permit allows an MP to import any vehicle, petrol or diesel, regardless of engine size, up to the value of US$ 35,000, which is just over Rs.3.6 million. But a similar vehicle imported on a duty paid basis will cost more than thrice as much - and we are not even talking of diesels here. Thus there is a huge demand from the affluent sections of the society for duty free car permits, by using which they gain a very substantial saving.

Thus an E-Class Mercedes Benz or a 5-Series BMW imported at a CIF value of US$ 35,000 or less becomes a very attractive proposition for a private buyer willing to spend six to seven million rupees on the permit.

If he were to buy a similar car on the open market, a petrol E-Class/BMW 5 Series or an Audi A6 costs more than 18 million rupees. He is thus looking at a saving of at least six million rupees. It benefits both parties in that the MP can pay off his debts and the new user saves a substantial amount of money.

However, the MPs circumvent the legal provision that the vehicle cannot be sold within five years by letting the user run it on open papers or a power of attorney. Needless to say, this is a corruption by another name.

There are several aspects to this issue. It is true that MPs need a good vehicle for their official duties and for private use. This is especially so in the case of MPs in rural areas. Another stark reality is that the LTTE is aiming to assassinate the country's leaders and top ministers. They have to be protected round the clock regardless of the cost, which includes armoured, high security vehicles.

Apart from these concerns, the question arises as to whether every MP (and even provincial councillors) deserves expensive vehicles. One solution would be purchasing locally assembled vehicles for the MPs directly by the Government without issuing permits. This will save foreign exchange as well.

The other solution is to make vehicles more affordable for all. This will obviate the need for resorting to illegal means to acquire cheaper vehicles.

Again, local manufacturers should be encouraged to increase the local component of their vehicles, depending on which further tax concessions can be granted. As for import duties and taxes, they are far too high in this country - up to a staggering 472 per cent for diesels. This is rather imprudent, given that the latest diesel passenger cars are ultra-efficient (some do 65 mpg) and ultra-clean. Having more diesels will help save fuel and foreign exchange in the log run.

Even a petrol car with an engine capacity higher than 1.6 litres attracts a duty/tax exceeding 231 per cent. These should be brought down to reasonable levels and there is every chance that higher sales could translate into more revenue for the State coffers.

Furthermore, this will also help bring down imports of environmentally unfriendly and mechanically worn reconditioned cars as no one will buy used vehicles if brand new cars are equally affordable.

That said, the Government took a step in the right direction by granting concessionary duty permits to public servants. But there is another segment of our population who deserve it more than any other - our expatriate workers who remit billions of dollars every year.

Those who have worked abroad to improve our economy should be granted duty free permits for small to medium size cars and utility vehicles. That will be truly appreciated by the masses.