Sri Lanka's government is set to reopen the importation of passenger vehicles on February 1, 2025. In anticipation of a surge in demand, Advocata Institute Chair Murtaza Jafferjee has proposed a temporary surcharge tax on vehicle imports. This measure aims to mitigate revenue loss from potential under-invoicing.
Jafferjee suggested that the government announce this tax policy in advance, stating, 'The people who want cars quickly, pay more. So announce a policy and say the tax system is going to be for the next six months. After six months, drop it; after 12 months, drop it.'
Charaka Perera, past president of the Ceylon Motor Traders' Association (CMTA), supported this tax strategy. Meanwhile, Duminda Hulangamuwa, Senior Economic Advisor to the President, noted the government aims to collect Rs. 300 billion in revenue from vehicle imports. Jafferjee acknowledged that while property taxes are more equitable, vehicles provide a more straightforward taxation avenue.
He criticized the current unit-based duty system as flawed, contributing to market distortions. 'The current system, based on the size and capacity of the engine, is completely flawed and is creating too much distortion in the market,' he said. He advocated for a gross vehicle weight method to prevent under-invoicing issues.
Hulangamuwa indicated that although the gazette will be issued on February 1, it will take 1 to 1.5 months for used vehicles and 5 to 6 months for new vehicles to arrive in Sri Lanka.