Latest vehicle taxes still lower than Rajapaksa era

• Minister says Rs. 1.25 m tax on small cars still less than Rs. 1.65 m under previous Govt. 

Finance Minister Mangala Samaraweera yesterday defended the latest round of tax increases on vehicles, insisting that even the latest hike in taxes was still below the rates imposed under the former Government led by ex-President Mahinda Rajapaksa.  

High vehicle imports over the last few months had widened the trade deficit and placed additional pressure on the rupee, Samaraweera noted, pointing out that imports in the first five months of the year had doubled from $ 316 million in 2017 to $ 666 million in 2018.  This equates to about 24,000 small car imports each month, the Minister said. 

“Taxes were increased considering an appeal made by the Central Bank. We know that this measure affects the middle class who are most keen to purchase a vehicle for themselves. We want to create an environment that allows the middle class to expand so with that in mind we have ensured that the tax rates are still lower than what existed in 2014,” he said.

He pointed out that a car with 1,000 cc capacity was taxed Rs. 1.65 million under the previous Government but even with the latest increases the tax component for the same car was still Rs. 1.25 million. 

“When we presented Budget 2018 we reduced the tax to Rs. 825,000 which was the reason behind the increase in small car imports. However, due to macroeconomic considerations we had to increase taxes but they are still less than what was under Rajapaksa.”