Influx of luxury cars at low duty to deny state billions

The government’s Budget 2018 which removed the ad-volerum calculation method of duty on vehicles and brought about a scenario of subsidising the duty on super luxury cars has resulted in the coffers losing around Rs 25-40 million from each of these vehicles, alleged a top official of a leading automobile import company based in Colombo.

As a result of this there has been an influx of luxury cars into the country recently of the brands such as Ferrari, Lamborghini, Porsche, Bentley, Range Rover, Mercedes, BMW and Audi etc , he said.

Confining the duty calculation on vehicles engine capacity and removing the ad-volerum calculation of duty introduced by the budget is seen as a move adopted to discourage the average citizens the chance of purchasing a car by making them expensive. However this resulted in making the super luxury category cheaper.

It is reported that many of these super luxury vehicles imported hurriedly after the relaxation of tax on them have already been cleared from the port and there are many more on the way, some by air.

The loss projected for the next 12 months based on 5,000 vehicles at an average of Rs 20 million per vehicle would be in excess of Rs100 billion. It is also the view of many in the automobile industry that it is time that this oversight is corrected without being shy about it as some of the senior policy makers also have shown their surprise over this serious issue and some say that this can even exceed the alleged loss reported in the infamous bond scandal.

A senior industry source on condition of anonymity said that apparently already over 100 super luxury cars had been cleared from the port causing losses of billions of rupees to the government and over 400 units are in shipments that will arrive in the country in the next few weeks. He also said that another alarming point is that the new system creates opportunities for siphoning out money from the country as the CIF value is now not considered for duty calculations, thus aiding money launderers and anyone who wish to send money out of the country to do so by hooking up an invoice and siphoning out money, putting pressure on the already stressed foreign reserves.