All you need to know about the new vehicle taxes

COLOMBO (News 1st): The 2019 Budget proposal presented on Monday (March 4) by Minister of Finance Mangala Samaraweera had it's good and bad - depending on how one looked at it. One thing that caught the people's attention in particular, was the increase in taxation of vehicles. Taxes were increased for small vehicles and a new tax system was introduced for Luxury vehicles above Rs. 3.5 Million.

Petrol and Hybrid vehicles

Prior to the 2019 Budget; A petrol vehicle with 650cc engine capacity had a Rs. 1,500,000 tax slammed on it, with the tax on its Hybrid counter-part being Rs 250,000 lesser. Vehicles with a 1000cc engine had a Rs. 1,750,000 tax slammed on them, while the Hybrid vehicle with the same capacity suffered Rs. 500,000 lesser in taxes. Any vehicle with an engine capacity between 1000cc and 1300cc came with a Rs. 3,575,000 tax. The same capacity range Hybrid had a Rs. 2,600,000 tax on it. Those between 1300cc and 1500cc came with a Rs. 4,875,000 tax riding on it, while it's Hybrid counter-part carried a Rs. 3,750,000 tax on it. A Hybrid vehicle with engine capacities between 1800cc and 2000cc had a Rs. 10,000,000 tax slapped on it. Following are the figures provided by the Vehicle Importers Association after the 2019 Budget presentation; To be more specific, the following graphic shows a list of the most common vehicles purchased by the average Sri Lankan, and how the prices on those vehicles have increased.

The Luxury Tax

This next bit can get a little tricky to understand, so bear with us. The 2019 Budget which was presented on Monday (March 4) imposed varied taxes on 'luxury vehicles'. According to the Budget, the taxes are to be imposed on CIF (Cost, Insurance and Freight) value. Taxes added to the original price (when the tax-free threshold is exceeded) are as follows:

• Diesel vehicles: When cost exceeds by Rs 3.5mn – 120% tax added
• Petrol vehicles: When cost exceeds by Rs 3.5mn – 100% tax added
• Hybrid Diesel: When cost exceeds by Rs.4mn – 90% tax added
• Hybrid Petrol: When cost exceeds by Rs.4mn – 80% tax added
• Electric vehicle: When cost exceeds by Rs.6mn – 60% tax added

This has been dubbed as the 'hidden luxury tax' by the Vehicle Importers Association. As a result of this 'hidden' tax, all vehicles with a CIF value of Rs. 3.5 million or over will be subjected to an additional “Luxury tax”. According to Arosha Rodrigo, the Secretary of the Vehicle Importers' Association, these increases -coupled with the depreciation of the rupee- has "resulted in a significant price increase for new imports". Rodrigo says that the newly introduced “Luxury tax”, which is imposed on top of the existing import tax, has made it impossible to import vehicles which have got a CIF value of above Rs. 3,500,000. "Even though the treasury is expecting a boost in revenue from vehicle imports, this increase will only deter importers to import new stock as the new stock is bound to be drastically more expensive than the existing stock," he added. What are the vehicles which will be affected by this tax, you ask? The following is a list of the most popular/common vehicles which fall in this category and their price increases next to it.

Is all this a good thing? or bad?

Like we said at the beginning, it all depends on how you look at it - and also how the government sticks to its promises, proposals, and execution. A point and a section of the budget which is overlooked by almost everyone is that the Minister of Finance proposed developments to improve the public transportation in Sri Lanka in the next five years. If the government stands by its promise to develop the public transportation system in terms of quality, standard, and discipline, and introduce a light-rail, people won't have to use their vehicles as much. This, in turn, will reduce congestion in Colombo, Greater Colombo and even in Kandy by a significant amount.