Carbon tax disparity affects middle class car owners

Sri Lankan motorists are compelled to pay a carbon tax under the blue green economy proposal of 2018 budget aimed at reducing environmental pollution and ecological imbalances with effect from January 1 this year.

While welcoming the move aimed at environmental conservation, motor traders said that the measure will push vehicle prices up and depress sales volumes as well as some disparities in the taxation system.

The new tax is not based on carbon emissions volume but only considering the year of manufacture and the engine capacity of the vehicle, they said.

The new tax is applicable to all vehicles and the registered owners of every motor vehicle specified in the Act will have to pay this levy.

While electric vehicles are exempted, all other vehicles including the state-owned vehicles are liable for the carbon tax, the Finance Ministry announced.

According to the Finance Act No. 35 of 2018 the registered owner of any relevant vehicle shall pay the carbon tax for every year, other than for the first year of the registration at the time of renewal of the annual registration of the vehicle.

The government expects to collect Rs. 2.5 billion from the tax where the applicable rates for a motor cycle, car and a passenger bus would be around 17 cents, Rs. 1.78 and Rs.2.74 per day, respectively.

The new tax is based on the engine capacity of motor vehicles, with the rate depending on age and fuel type of the vehicle. Electric vehicles are exempted from the levy.

Commissioner General of Motor Traffic Department A.H.K. Jagath Chandrasiri disclosed that vehicles with a manufacturing date of less than five years will be charged a tax of 25 cents per cubic metre while vehicles with a manufacturing date between five and 10 years will be charged a 50 cent tax per cubic metre.

He noted that vehicle owners should pay the tax when obtaining the revenue license.

However the tax will not be levied on motorists who obtained their revenue licences this year, Mr Chandrasiri said adding that it will be applicable from 2020.

One of the main disparities in the carbon tax is taxing based on the engine capacity and not on the usage, as the carbon footprint depends on carbon emissions to the environment, an analyst said pointing out that it is proportionate to the engine capacity as well as number of turns of vehicle’s travelling on roads.

Citing an example, he noted that the carbon foot print of a luxury Toyota car running on roads very seldom is less than a Maruti owner driving to work six days of the week although this car has a smaller engine compared to the Toyota luxury car.

The Sri Lankan motorist has already been paying an emissions tax to the government for years and the carbon tax will be an additional levy on them, he emphasised.

On the other hand taxing based on the age of the vehicle will make the middle class people pay more taxes than the rich using brand new cars and changing it frequently, he said.