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Monday, 23 July 2018 00:45 - - {{hitsCtrl.values.hits}}
From left: Vehicle Importers Association of Sri Lanka Executive Committee member former Secretary Anil Adikari, Secretary Arosha Rodrigo, President Ranjan Peiris, Treasurer Prasad Priyanga Manage, former President and Executive Committee member Dinesh Senanayake and Assistant Secretary Mahesh Fernando – Pic by Ruwan Walpola
By Charumini de Silva
The Vehicle Importers Association of Sri Lanka (VIASL) recently called on the authorities to remove the current monopoly enjoyed by franchise dealers in bidding for Government tenders, while issuing a clarion call urging the authorities to consider a series of concerns detrimental to the industry.
The association pointed out that the agents had an unfair advantage as new vehicles imported by parallel importers did not receive the applicable ‘brand new’ status despite the vehicles not being previously used, which is a detrimental qualification for VIASL members pitching for Government tenders.
“Removing the monopoly enjoyed by agents in bidding for tenders is on the cards for the 2019 Budget proposals,” VIASL President Ranjan Peiris told the Daily FT.
He said that they urged the authorities to consider this matter not just because agents enjoy a tender monopoly but because the Government was being forced to purchase certain vehicles at a higher price resulting in the wastage of public money.
Stating that there were around 20 franchise dealers in the industry that the Government had to rely on for tenders, Peiris stressed that if the monopoly was eliminated there were over 1,500 parallel importers to get down good quality vehicles at competitive prices.
Noting that many of the practical proposals submitted by VIASL got a noteworthy response from the Government, such as introducing relevant safety features and emission standards, the association expects that the authorities will heed their concerns.
“We had a preliminary meeting last week with the Finance Ministry and they are now in the process of setting up a special committee comprising the Central Bank, Treasury and Customs. This year we want to understand the Government’s concerns and submit our proposals accordingly. The Central Bank wants to control the dollar outflow and we want to support them, not go against them or look at our business. We are hoping to submit our Budget proposals by next month,” he added.
“We have informed the authorities to consider permitting a ‘brand new status’ for zero mileage vehicles because we get down brand new vehicles. It is well-known by the Customs as well as the Registrar of Motor Vehicles (RMV). They can physically check and we have all the mechanisms to verify. However, certain people don’t want to do it because they want to have the entire supply of vehicles to the Government,” he stated.
With the depreciation table being abolished, he said traders who import vehicles which are up to three years old are also required to pay the same tax as that imposed on brand new vehicles. Thus, the association called on the authorities to urgently look into this matter.
He refuted claims by franchise dealers that VIASL members were paying reduced taxes for the brand new vehicles imported. Highlighting that the tax on a vehicle is based on the engine capacity, he clarified that the parallel importers register or deregister them due to the export regulations of relevant countries.
Peiris also said that the engine capacity tax was mainly instituted by the Finance Ministry with a view to prevent errors in calculating import tax based on valuation and to prevent any revenue leakage from Government coffers.
According to him, parallel importers bring down domestic models as opposed to the export models that the agents import. “All manufacturers produce the highest quality model for their domestic market, hence customers in Sri Lanka get a better value when purchasing a vehicle from a parallel importer rather than buying it from an agent. The domestic models have various additional options and are rich in safety and emission standards,” he added.
Furthermore, he stressed that parallel importers provided a better platform for permit-holders and end consumers in terms of the delivery of the vehicle.
“Franchise dealers place bulk orders with principal manufacturers resulting in long delays of up to six to 18 months for vehicle delivery, while we deliver within two to eight weeks. This also prevents the end consumer from getting caught in the volatile exchange rates as well as changes in taxation,” Peiris said.
VIASL Secretary Arosha Rodrigo noted with dismay the complaints of the agents of brand new vehicle importers to the Government regarding their shrinking profit margins and market share as a result of parallel importers.
“We would like to remind the stakeholders of this industry that consumers seek importers’ used vehicles due to their competitive price and quality. Franchise dealers can only bring the export vehicles, they can’t bring the domestic version. The consumers are much educated now and this is why franchise dealers are upset because they have now understood that domestic cars are far superior to the export version. That is why they try to talk about the market share and low profit margins. Liberalising the market not only leads to a thriving and healthy competitive marketplace but it allows all citizens to benefit,” he pointed out.
He also claimed that the proposal put forward by some franchise dealers on applying the break horsepower (BHP) as the basis for calculating the duty of motor vehicles without applying the engine capacity was an ancient method, cautioning that if implemented various malpractices could occur when calculating duty amounts.
“Implementing BHP is not a good proposal as it could be adjusted using various methods. This could result in heavy revenue leakages and a severe drop in expected revenue by the Treasury,” Rodrigo added.
