New duties on used cars will drive traders round the bend

Traders warned yesterday that new duties on used cars would cripple their trade.

The warning came from the Vehicle Importers Association of Sri Lanka.

Its chairman Mahinda Sarathchandra said that the revised duties for used car imports would be almost the same as the volume levy for brand new cars.

Under the revised system of taxation, the tax table on the imports of a vehicle used between six months to a year will be the same as the amount levied on a brand new imported vehicle, while the tax on a vehicle used for 18 months and imported will go up to 90% from the present rate of 75%.

Although taxes on motor vehicles were not increased in the Budget, the President announced a change in the system of levying of Customs duty on vehicle imports which means that taxes on a used motor vehicle would be the equivalent of duty levied on a brand new vehicle imported into the country.

He said the association representatives would meet President Rajapaksa and urge him to revert to the older system.

"There are nearly 1,000 reconditioned vehicle importers in the country and we employ over 10,000 persons. If the new duty levying system is put in place, our business will collapse," Sarathchandra said.

He said the new system will only benefit the 12 new vehicle importers in the country while a motor vehicle will become unaffordable for the mid- dle class.

The average increase in taxes expected with the new Budget proposals is between Rs. 250,000 and Rs. 1.4 million on motor vehicles. For example, the additional duty on a school van will be around Rs. 1.4 million, he said.

Sarathchandra said that the second hand vehicle market in the country had suffered heavily last year as well due to the heavy tax increase in 2013 and this year's proposals would make the situation worse.