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Govt. urged to rethink duty structure on vehicle imports


Skyonline
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The government has been told to rethink the current tax duty structure on vehicle imports and Luxury Tax, as they have effectively put a lid on vehicle imports in excess of 1,600cc engine capacity.


According to the latest vehicle registrations data analysed by JB Securities, a Colombo-based equities brokerage and a research house, only one new car and four pre-owned cars have been registered with engine capacity in excess of 1,600cc in December. 


“Taxes on cars are via an excise duty based on the engine capacity and a Luxury Tax of 60 percent above the value of Rs.4.0 million—an illustration of the need for a rethink of the current policy,” JB Securities Managing Director Murtaza Jafferjee stated in a note. 


Last October, the then government revised the Luxury Tax formula on vehicles by resorting to calculate the tax based on the manufacturing cost or the cost, insurance and freight (CIF) value of a vehicle, instead of the previous used method based on the engine capacity. 


The new tax move was expected to generate revenue of Rs.48 billion. The revised tax is applied on vehicles registered on or after November 1, 2019. 

The Luxury Tax on vehicles registered before November 1, 2019, was based on their engine capacity.

Accordingly, pre-November 1, the Luxury Tax was applicable on only three categories of vehicles—petrol vehicles with cylinder capacity more than 1,800cc, diesel vehicles with cylinder capacity of more than 2300cc and electric vehicles with more than 200kw power.


But after November 1, the Luxury Tax became applicable on all petrol and diesel vehicles with a CIF value exceeding Rs.3.5 million. A tax rate of 120 percent is applicable on the amount exceeding the luxury free threshold i.e. Rs.3.5 million.


The Luxury Tax applicable on hybrid petrol vehicles exceeding the CIF value of Rs.4 million is 80 percent and on hybrid diesel vehicles exceeding the CIF value of Rs.4 million is 90 percent. 


On electric vehicles with a CIF value exceeding Rs.6 million, a 60 percent Luxury Tax is charged.


At the time the amendment was brought in, the vehicle importers opposed to the move, saying it would hit their sales dearly.

http://www.dailymirror.lk/business__main/Govt-urged-to-rethink-duty-structure-on-vehicle-imports/245-182039

 

 

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Seriously tired of sri lanka's take on vehicle taxes. A 20-year old Toyota Glanza costs nearly $9,000 here. That is not healthy for the economy, for anyone or anything.

Either fix the public transportation system, or fix the vehicle system. Not screw up both together.

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I wonder why the study was so keen on getting more cars with larger engines registered...for the government to rethink the tax structure wouldn't they need to give good reason as to why larger capacity engines need to be brought in ?

Sri Lankans should have the freedom to buy whatever car they want and if there is a good public transport system people will fall in to habits like in Japan, Singapore and HK where the car is used only for family/weekend/pleasure outings but use public transport for work and stuff. So public transport is key...and that also might help with reducing the number of used cars in a small island.

However, how are our foreign currency reserves ? Cars are highly taxed to discourage people from sending out money and larger engine cars are quite expensive than the smaller engine ones....one could argue that people will buy only what they can afford...but are we Sri Lankans really that sensible ? We have plenty of people buying cars they cannot afford.

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This is wishful thinking of vehicle traders

They may do this to increase tax revenue by increasing imports of vehicles as this has been the trend in the past, however with reserves we have and depleted inflow of foreign exchange I don't think we can afford it at this moment.

May be this will be touched at the next budget. 

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On 1/29/2020 at 12:18 AM, iRage said:

I wonder why the study was so keen on getting more cars with larger engines registered...for the government to rethink the tax structure wouldn't they need to give good reason as to why larger capacity engines need to be brought in ?

Sri Lankans should have the freedom to buy whatever car they want and if there is a good public transport system people will fall in to habits like in Japan, Singapore and HK where the car is used only for family/weekend/pleasure outings but use public transport for work and stuff. So public transport is key...and that also might help with reducing the number of used cars in a small island.

However, how are our foreign currency reserves ? Cars are highly taxed to discourage people from sending out money and larger engine cars are quite expensive than the smaller engine ones....one could argue that people will buy only what they can afford...but are we Sri Lankans really that sensible ? We have plenty of people buying cars they cannot afford.

What you drive is matters in SL, it's a symbol to show others how rich you are. I have noticed a new fashion during my last visit to SL, Most of the younger generation hang the car key with a key tag on the belt guide as you need to park your car at a car park and others don't know what you driving. ?

I am sure attitude change needed before everything.

regards,

JC.

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5 hours ago, john cooper said:

What you drive is matters in SL, it's a symbol to show others how rich you are. I have noticed a new fashion during my last visit to SL, Most of the younger generation hang the car key with a key tag on the belt guide as you need to park your car at a car park and others don't know what you driving. ?

I am sure attitude change needed before everything.

regards,

JC.

Wonder it matters much as the key for the Wagon R, Swift or Vitara for that matter is same.

I guess it is same with other brands as well

 

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13 minutes ago, kush said:

Wonder it matters much as the key for the Wagon R, Swift or Vitara for that matter is same.

I guess it is same with other brands as well

 

 

5 hours ago, john cooper said:

What you drive is matters in SL, it's a symbol to show others how rich you are. I have noticed a new fashion during my last visit to SL, Most of the younger generation hang the car key with a key tag on the belt guide as you need to park your car at a car park and others don't know what you driving. ?

I am sure attitude change needed before everything.

regards,

JC.

So you guys are telling me the owner of the rickety rackety 50-year old W123 is attracting more gold diggers than the owner of a vitara cuz he has a benz keytag? 

:king2:

Edited by □AVANTE□
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4 hours ago, □AVANTE□ said:

 

So you guys are telling me the owner of the rickety rackety 50-year old W123 is attracting more gold diggers than the owner of a vitara cuz he has a benz keytag? 

:king2:

It depends on the target demographic I know a guy whose 2007 Vitz is a chick magnet 

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Getting back on track..I do believe that before anything else the government needs to introduce proper (and stringent) vehicle inspection process to make all vehicles actually road worthy.  Then introduce a proper road tax system which would encourage people to actually use eco friendly and energy efficient cars. Following that....just change the import duty structure to something more reasonable and less complicated and less asinine.

If the road worthiness inspection is stringent on one hand it will discourage car sales people from bringing in junk (which is what the 3 year age limit was suppose to stop anyway..anti-dumping), make the roads safer on the other hand, and on the extra hand they can be bit more lenient on the age restriction of the car. This is pretty much what UK, Aus and Japan does. You can bring any aged car in to the country, but if what you bring in is junk you have to spend a lot to get it road worthy (thus even if it is old people are only going to bring in decent condition units) and then because of the old tech and the eco harm who ever buys one has to spend a lot in road taxes. So those who do bring in old cars are usually enthusiasts bringing in decent cars...not bargain hunters. Needless to say the public transport system needs to be improved for this to be effective....but perhaps if the taxes are introduced the government can be made to be a little bit more proactive about fixing the public transport service.

Besides..the government can make a lot more money from people using the cars than those importing new ones....but then there is going to be a whole lot of the population who are going to be yelling and screaming about their personal freedoms being violated. This actually would not mean that they cannot afford a car...in fact they would be able to afford a decent a car....it is just that they are discouraged from using it on  daily basis (and they shouldn't have to...we all pay taxes..the government should give us cheap transportation rather than buying themselves luxury barges)

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4 hours ago, iRage said:

Getting back on track..I do believe that before anything else the government needs to introduce proper (and stringent) vehicle inspection process to make all vehicles actually road worthy.  Then introduce a proper road tax system which would encourage people to actually use eco friendly and energy efficient cars. Following that....just change the import duty structure to something more reasonable and less complicated and less asinine.

If the road worthiness inspection is stringent on one hand it will discourage car sales people from bringing in junk (which is what the 3 year age limit was suppose to stop anyway..anti-dumping), make the roads safer on the other hand, and on the extra hand they can be bit more lenient on the age restriction of the car. This is pretty much what UK, Aus and Japan does. You can bring any aged car in to the country, but if what you bring in is junk you have to spend a lot to get it road worthy (thus even if it is old people are only going to bring in decent condition units) and then because of the old tech and the eco harm who ever buys one has to spend a lot in road taxes. So those who do bring in old cars are usually enthusiasts bringing in decent cars...not bargain hunters. Needless to say the public transport system needs to be improved for this to be effective....but perhaps if the taxes are introduced the government can be made to be a little bit more proactive about fixing the public transport service.

Besides..the government can make a lot more money from people using the cars than those importing new ones....but then there is going to be a whole lot of the population who are going to be yelling and screaming about their personal freedoms being violated. This actually would not mean that they cannot afford a car...in fact they would be able to afford a decent a car....it is just that they are discouraged from using it on  daily basis (and they shouldn't have to...we all pay taxes..the government should give us cheap transportation rather than buying themselves luxury barges)

@iRage for minister of transportation!                          :banana_hitit::banana_hitit::banana_hitit:

Edited by □AVANTE□
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As car lovers, we all hate taxes on cars...But I can’t imagine about the amount of traffic we’ll have to face after reducing the taxes. Still, I think there is more than enough cars in this country, and we don’t even have a recycling method for old cars. People still ride those 1970’s cars with a same amount of potty and paint applied equal to that of the vehicle’s weight..Yes, they can’t get a newer one, but still,  a bit of a reduction is acceptable...

Edited by alpha17
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It is not the higher tax but the basis and lack of consistency that is creating issues.

For instance it is better to buy a 1.5L Merc C200 than a 1.6L Toyota Corolla as the tax is less on the Merc. (This was before implementing luxury tax which has created another set of anomalies)

One can imagine special tax on electric or hybrids for economy (not the Porsche Tycan and La Ferrari) to promote green motoring.

A simple tax based on the price bracket would have worked much better and fair for everyone.

If you want to promote fuel economy best is to tax fuel which will compel high users to switch for more economical vehicles.

 

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On 1/30/2020 at 7:53 AM, □AVANTE□ said:

 

So you guys are telling me the owner of the rickety rackety 50-year old W123 is attracting more gold diggers than the owner of a vitara cuz he has a benz keytag? 

:king2:

Believe me I own a 2019 Vitara, the car and the key are NOT chick magnets, not even close. Except the occasional gent who looks mistaking it for a land rover suv

 

I had a noisy military green Defender 90, with oil seeping all over, on 33" tyres now that was like chick central. 

Edited by tiv
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1 hour ago, tiv said:

Believe me I own a 2019 Vitara, the car and the key are NOT chick magnets, not even close. Except the occasional gent who looks mistaking it for a land rover suv

 

I had a noisy military green Defender 90, with oil seeping all over, on 33" tyres now that was like chick central. 

We coulda used an opinion of a chick right about now

What a pity AL is a one big sausage fest ? even ElaKiri has one or two regular clams

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1 hour ago, tiv said:

I had a noisy military green Defender 90, with oil seeping all over, on 33" tyres now that was like chick central. 

Must be getting alot of heat from the minister of home affairs as well!

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1 minute ago, Hyaenidae said:

We coulda used an opinion of a chick right about now

What a pity AL is a one big sausage fest ? even ElaKiri has one or two regular clams

Funny coincidence, while using the forum, a buddy of mine was looking over my shoulder and asked "hey, aren't there any girls in the AL Forums?"

Wonder if anyone here has the rank of 'biggest sausage' and drives a car that reflects that :action-smiley-043:

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1 hour ago, Hyaenidae said:

I'm all for gender equality and everything but that line of thinking is better left for the womenfolk imo

Well according to professor Jeremy Clarkson, bigger the vehicle,smaller the weener. 

Hummer drivers, where you at??

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11 hours ago, Skyonline said:

It will be better if vehicle duty is calculated on the cubic capacity (CC) of the engine, be it petrol, diesel or hybrid, this system will be acceptable to all segments of the industry, including the customer.

Actually that is where it starts breaking apart and stop making sense. This is the reason why a C-Class with a 1500cc engine gets taxed more than an export variant Corolla with a 1600cc engine.

It should be CIF based considering what SL used to do (in the 1980s) and almost every other country and then have different tax brackets for road taxes based on CC .  Granted the CIF based import taxes have different brackets (eg...1000cc or above  - 25%, 1300 above - 30% 1500 above - 40% 1800 above - 50%, etc...) which bracket the vehicle gets classified is based on what the car is classified as by the manufacturer. (i.e. it gets rounded up/down)

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On 1/31/2020 at 8:28 AM, kush said:

It is not the higher tax but the basis and lack of consistency that is creating issues.

For instance it is better to buy a 1.5L Merc C200 than a 1.6L Toyota Corolla as the tax is less on the Merc. (This was before implementing luxury tax which has created another set of anomalies)

One can imagine special tax on electric or hybrids for economy (not the Porsche Tycan and La Ferrari) to promote green motoring.

A simple tax based on the price bracket would have worked much better and fair for everyone.

If you want to promote fuel economy best is to tax fuel which will compel high users to switch for more economical vehicle

Yes as a result of all these we have kei cars travelling on roads they were never designed for, risking the life and limbs of the occupants.

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6 hours ago, iRage said:

Actually that is where it starts breaking apart and stop making sense. This is the reason why a C-Class with a 1500cc engine gets taxed more than an export variant Corolla with a 1600cc engine.

It should be CIF based considering what SL used to do (in the 1980s) and almost every other country and then have different tax brackets for road taxes based on CC .  Granted the CIF based import taxes have different brackets (eg...1000cc or above  - 25%, 1300 above - 30% 1500 above - 40% 1800 above - 50%, etc...) which bracket the vehicle gets classified is based on what the car is classified as by the manufacturer. (i.e. it gets rounded up/down)

iRage the reason for the current tax based on engine was due to the importers undervaluing and bringing down vehicles, the new system was good in a sense that everyone fell into line and government now knows exactly how much of money is been sent for a vehicle. One of the loopholes made use by importers nowadays have been to bring high engine capacity vehicles classified as 1.4l or less (recently a few Audi A4 2.0l cars have come saying 1.4l engine, customs inquiry is pending). Do agree that its unfair by the Japanese and Korean imports. But the more we have people who try to bypass the law the more we will have to go through with this.

Being from the industry I can tell you right now that as employees of local agents we dont see where our future will end up. As of now everyone is budgeting for the worst, as its come to a time like 2007-2010. As agents we never had the chance to get used to one tax structure as when they change it takes the agents around 3-4months to get stock and going by what was happening last year or so, its been like getting back to principals every two months saying policy change and they are like "for real? please go back and come when you know what policies are been implemented, we cant change our production plans to suit you".

For all those who shout saying that the industry is struggling, you just need to look at their stocks, you go to Kohuwela you see how many cars are just there, and all those cars came before the implementation of luxury tax, they have no issue selling those vehicles for another year or so. Its the local agents who are struggling.

Its sad that all the governments that came into power taxed the car buyer but never used that tax money to build infrastructure or transport solutions for this country. I for one would like to use public transport, but I use it very sparingly as I dont know how long I will have to be on the road and whether I will be able to go to my destination in the same way that I left home. I was honestly thinking that the new government would do something about all this, but sadly it doesnt seems so as all the crooks are trying to get inside and pushing for their agendas. Its a sad situation.

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See Gummybear...that is the problem. No matter what policies are enforced the car salesmen always abuse it....even the age restriction..you can buy a 1 year old Premio for 2.3 mil yen or a similar spec one for 1.2mil yen..we all know what they bring down. Then there was a time a fully loaded 2 year old Carina Ti cost only like 1500USD according to what car importers declared. Yes...SL has plenty of cars on stock. I cant see why we need to import more except for these guys to just move their old stock at higher prices claiming it's because of new taxes. The govt tried to halt imports for sometime and these morons created a whole load of BS and got it overturned. 

To be honest I think the agents' valuation method did work for the most part. It does not matter what the importer says. 

Like I said..we need stricter enforcement on what is road worthy which would discourage grey importers from bringing in crap and that would kill 75% of them off (maybe even pre-clearence import inspections)....tax usage in a matter that encourages eco friendly vehicles..have a simpler tax system (using agent valuations and different brackets based on cc). Then with the smaller lot of importers regulate the hell out of them. Do we really need this kany car importers ? It seems like there are more car importers showrooms than clinics and hospitals. An interesting thing they did in Esst Timor was all cars needed to be registered before clearing from the port. Maybe we should do something similar. 

As for agents...I do feel their plight. They get hosed on vehicle sales as well as parts (they have to sell parts at a premium to just stay a float..whilst we consumers pay normal prices for crappy counterfeits)

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