The government loses billions of rupees in terms of revenue to its exchequer due to tax evasion by some vehicle importers who import luxury vehicles under the used vehicles category, a minister said yesterday.
State Finance Minister Eran Wickramaratne told Daily Mirror the government had identified the loss of revenue that had taken place and taken precautions to avoid such losses from recurring through the budget for 2018 by the introduction of taxation based on the engine capacity of vehicles to avoid tax dodging by importers.
“Taxation is calculated according to the declared value of imported vehicles currently. Which means if it is valued at a lower rate, the amount of tax payable also becomes less,” he said.
The State Minister said the government had estimated the loss of revenue as a result of this to be running into billions of rupees.
Meanwhile, industry sources said even vehicles such as a Range Rover, Mercedez Benz, Audi, and BMW are imported in this manner. Industry sources said these unauthorized importers bring down “Brand New” cars hiding behind the used car qualification, completely manipulating the tax provisions allocated for a genuine used car by the government.
According to sources, the current used car declaration by Sri Lanka customs saying a vehicle has to be registered in the country of export does not outline the period, mileage etc. The source said this loophole created room for some importers to bring down brand new cars in the guise of them being used cars and enjoy the benefits provided for importers of used vehicles.
It is learnt that a loss of Rs.9 billion was reported during 2015- 2017 period as a result of such practises. “These unauthorized importers claim a 20 per cent VAT refund from the UK government at the time of exportation. They are also able to claim an electric/ hybrid subsidy which is offered by the UK government when purchasing environmentally friendly cars. They also get a tax concession of 15
per cent from the local customs for importing a used vehicle whereas these vehicles are not used vehicles but brand new,” the source said.