Tax exemption for luxury, electric vehicle caused over Rs.14 bn loss

Sri Lanka has incurred a massive loss of billions of rupees annually as a result of exemption granted to import luxury vehicles and electric vehicles since 2019 up to August 2023 under the concessionary vehicle permit scheme.

According to the Finance Ministry data the government has lost Rs.14. 58 billion in revenue due to tax exemptions given to import luxury and electric vehicles during the period of 2019 to 30-08-2023.

The ministry has published these data recently for the first time to fulfill an IMF commitment in accordance with the US$2.9 billion extended fund facility programme.

The Government’s commitment to the IMF was the establishment of a fiscal transparency platform by June 2023, to semiannually publish significant public procurement contracts, a list of firms receiving tax exemptions through the Board of Investment, and a list of individuals and firms receiving tax exemptions on luxury vehicle imports.

But it was not done at that time due to administrative and procedural delays up to now, a senior treasury official said.

The Treasury has to forego a massive sum of Rs.14.42 billion since the latter part of 2019 till the end of 2021 due to tax free permits given to 3507 individuals to import luxury vehicles valued at Rs.26.49 billion (CIF value), ministry data shows.

There were 49 tax free permits were issued up to August 2023 since 2021 incurring a loss of Rs. 156 million for the importation of electric vehicles valued at Rs 822.15 million (CIF value).

Before 2019, previous regimes annually offered up to 10,000 concessionary vehicle permits, most of which are used to import vehicles, which are either luxury or with higher engine capacity, losing the government a huge sum of Rs.94 billion per annum.

The luxury tax imposed on vehicles imported by lawmakers who served in parliament between 2015 and 2020 has been waived off by the then government, ministry sources revealed.