Buying a vehicle becomes a dream ... because of "Luxury Tax"

Buying a vehicle becomes a dream ...

because of "Luxury Tax"

What car importers say is that though rumours have floated around that prices of small vehicles have slumped, because of the newly imposed Luxury Tax a clear increase of vehicles has taken place, vehicle importers emphasise.

What was expressed by finance minister Mr. Mangala Samaraweera through vehicle importers is that after making amendments to the finance act as proposed by the budget of 2019 that the luxury tax
imposed on motor vehicles by quoting from the press release of last 29th was about rumours spreading about a decrease in tax of small vehicles and that of luxury vehicles rocketing up.

According to the media announcement of the finance ministry, the LT tax would be in force from March 6th, 2019 and after March 6th all luxury vehicles would be subjected to the new tax scheme. According to this new regulation, diesel and petrol motor cars and jeeps fetching a price of over Rs. 35 lakhs would be subjected to an LT tax, it is stated. Whatever it is, the finance ministry has notified that tax imposed on petrol cars less than a cylinder capacity of 1,800, diesel cars and jeeps less than a cylinder capacity of 2,300 and electric motor cars less than 200 kilo watts previously would be taken off with effect from November 1st. 

On an inquiry made from general manager of Car Mart (Peugeot), Mr. Pradeep Wijeyratna, this is what he said: "There is a rumour going round that tax on small vehicles has been brought down. But there was no necessity for taxes to be reduced in the case of small vehicles as such. This is an absolute fib. What has happened is that luxury tax has been amended and a new tax has been imposed. This is just something that leads the public astray. A new tax was introduced by the budget of March 5th. At that time this tax applied to motor cars and double cabs. Further, diesel and petrol motor cars, double cabs, diesel and petrol, hybrid and electric motor vehicles came under this tax. In the case of the CIF value of the vehicle, according to shipping costs, the total CIF cor in other words the value of the vehicle, insurance and value exceeds Rs. 35 lakhs; according to the budget of March 5th, a luxury tax was imposed on for every cent so increased and if the engine capacity of the vehicle in the case of diesel was over 2,300 and if petrol, it was 1,800.   

Under the above conditions, if the diesel engine of the vehicle is over 2,300 ... 12% luxury taxes were levied for every cent which accounted for that 35 lakhs. If the vehicle happened to be one which exceeded 1,800 where petrol engine  capacity was concerned ... a tax of 100% was levied for every cent which exceeded that 35 lakhs. In the same way, if vehicles which exceeded beyond the diesel engine and petrol hybrid vehicles capacity of Rs. 35 lakhs which were beyond diesel engine capacity of 2,300 and petrol of 1800 capacity, a luxury tax was charged 90% for diesel and 80% for petrol. 

However where small cars were concerned, there was no such tax. There in fact was no luxury tax for small cars below diesel 2,300 or below 1,000 petrol which cars belonged to the category of Alto, Maruti or Suzuki wagon. Though the value of such vehicles did not go beyond Rs. 35 lakhs, it did not affect that tax. Whatever it is, the finance ministry has taken steps to discard all engine capacities of the old system and thus introduce this luxury tax (LT) anew. As a result, those who were exempted from this tax earlier have had to pay the luxury tax. 

Though government servants wanted to get down a vehicle by utilising the vehicle permit afforded them after exercising great effort to accumulate finances, this has now totally been turned into a dream. It means that under this situation in future there will not be a possibility for any person to purchase a vehicle. The other point is, it was indicated that this luxury tax did not have an impact on those types by stating names of vehicles as is nowhere in the world. For example, it was stated that Axio, Premio and Alion did not come under the new LT tax. In that case if some producer released a vehicle with a badge attached to it with the name name Premio ... it then is not subjected to the to the tax. Though it is mentioned that there is no tax imposed on Premio, there are other vehicles that are imported to this country. There are vehicles like Nissan Sunny, Nissan Silfy, Toyota Corolla, Honda Civic, Mazda 323, 626 as well. In that case luxury taxes apply to this ... does it mean that it does not apply apply to Premium?  In the same way the Sri Lankan dollar today is Rs. 183. In days ahead if the dollar reaches something like $ 200, this luxury tax would further go up. 

By now the CIF value of a Peugeot car is about Rs. 42 lakhs. About six months back the value was around Rs. 36 lakhs. Since this said dollar has gone up, extra taxes have to be paid. These vehicles which have an engine capacity of about 1,200 are really not that much of a luxury condition as such. But with the technological advancement of motor vehicles, the luxury-state is determined not on the engine capacity but on the internal features added to the vehicle, the finance ministry has said. True enough, there are of course luxury vehicles such as Land Rover, Landcruiser which have an engine capacity of 3,000 or 4,000. Car permits which are of a value of Rs. 300 lakhs and which MPs sell ... these are luxury vehicles. 

Imposing this new tax on luxury vehicles is not justified at all. The government has made the public buying a normal vehicle ... a dream. This could be something of a decision carried out on purpose to provide consolation to a chosen set of people. Sri Lanka has become the only country in the world where a type of vehicle is mentioned and say that is is free from tax. In the same way, there is no gazette to be seen in this respect either. But this new tax revision is to be launched by November 1st. What they are simply doing is a joke", he finally said. 

- Shamila Perera -