CTMA warns of complete halt of motor trade with latest tax increases

The Ceylon Motor Traders Association (CTMA) yesterday expressed serious concerns over their viability in the face of the latest increases in taxes when the industry is suffering most from the import ban. 

CTMA said the Government imposed a complete import suspension on all types of vehicles (two-wheelers, three-wheelers, passenger cars and commercial vehicles) in March 2020 citing that it will be for a period of six months. 

But even after 31 months, the core products of the industry are still suspended and the Government has not provided any type of relief to the industry to date. 

Further, due to limitations in establishing LCs over the last few months, the import of genuine spare parts also reduced, which directly impacted the after sales business, the key revenue line left for the motor companies.

Prior to the import ban, the membership of CMTA employed over 30,000 individuals while over 6,300 island-wide SMEs were managed as dealers, which fuelled the rural economy with over Rs. 2 billion as dealer incentives. The CMTA members paid over Rs. 6 billion for outsourced services such as security, cleaning, logistics, storage etc., and facilitated vehicle finances of over Rs. 124 billion, which sustained many jobs in several trades including leasing and insurance. 

The excise duty contribution from the motor trade was Rs. 130 billion in 2019, which alone accounted for 6.8% of Government revenue. 

CTMA Chairman Charaka Perera said: “Due to the import suspension, the motor trade has been crippled and has lost over 10,000 jobs during the last two years. Further, over 1,500 dealers, which were SMEs based countrywide, have closed down which has a direct impact on the rural economy. “Stemming from the decline in business, the income of the employees has drastically reduced due to the lack of sales commissions and performance incentives while most of the CMTA member companies have not been able to provide reasonable increments or bonuses to compensate for the increase in cost of living.”

“In such a backdrop, the increase in inflation to over 64% has made it unsustainable to retain staff. Employees are moving out of the industry as well as out of the country, as they do not see a future within the motor industry. They can use the skills and experience gained to get sales and technical jobs in other countries. This is creating a severe talent drain for CMTA member companies and their operations are being hampered as a result,” Perera warned.

While the motor industry is facing such hardships, the impact of the announcement of the increased taxes for corporates and individuals would be unbearable to the motor trade as well as many other trades. Such a move would ensure a mass exodus of trained experienced employees, on whom the companies have heavily invested to train and who are not easily replaceable. 

The CMTA is requesting the Government to focus on multiple solutions such as reduction of Government expenditure, increasing efficiency of SOEs, increasing the taxpayer base and strengthening the tax collection systems, which would negate the requirement to drastically increase taxes for already tax paying corporates and salaried employees.