Deregistering brand new vehicles: a gimmick to pay lower taxes? | Sunday Observer

Deregistering brand new vehicles: a gimmick to pay lower taxes?

22 July, 2018

The Vehicle Importers Association of Sri Lanka (VIASL) came down hard on brand new vehicle importers to debunk their accusation that used vehicle importers are buying brand new vehicles and deregistering them in the country from which they import to pay low taxes.

Refuting the allegation VIASL President Ranjan Peiris said the claim made by importers of brand new vehicles that parallel importers are buying new vehicles and registering them as used vehicles to pay reduced taxes is totally false.

Clarifying further VIAL noted that according to the gazette notification 2044/32 of November 2017 the tax on a vehicle is based on engine capacity. The association said the reason behind importers registering brand new vehicles and deregistering them is mainly due to export regulations of the relevant country.

The Association also noted that the engine capacity based tax was mainly imposed with the aim of preventing errors in calculating import tax based on valuation and to overcome revenue leakage. Highlighting the disadvantage faced by parallel importers as a result of the depreciation table being abolished, traders who import vehicles that are up to three years old are also required to pay the tax imposed on brand new vehicles.

“We request the authorities to look into the matter on a priory basis,” Peiris said.

VIASL called on authorities to take steps to support parallel importers who are the mainstay of the industry. Parallel importers regularly face a volatile business environment with frequent taxation changes and the depreciating exchange rates resulting in customer difficulties and delays.

The Association also notes the issues faced by its members in coexisting within the industry with vehicle agents.

“As parallel importers bring down domestic models as opposed to export models the quality of vehicles imported are of high standard,” the VIASL president said.

When asked about VIASL’s view on the Euro 4 emission standards he said it is a good move that will, benefit the country as well as customers. The importation of vehicles below Euro 4 standard will gradually stop and that will help people to go for high standard vehicles.

A VIASL official said that importation of vehicles from Japan and India will stop is not exact as these countries manufacture vehicles that meet Euro 4 standards.

“It is that Sri Lanka has been importing vehicles that are below this standard. Henceforth importing vehicles below the Euro 4 standard will not be possible under the new regulation,’ he said.

Importation of vehicles which do not comply with Euro 4 emission standards and which do not comprise airbags and seat belts for the driver and the front passenger, anti braking locking system and three-point seat belts at the rear is not permitted from July 1.

VIASL also said so far they have not made any representations to the next budget but intends to make their proposals in the coming months after consultations.

The Association also notes with dismay the accusations made by agents of brand new vehicles to the government on their shrinking profits and market share due to parallel imports.

“We would like to tell stakeholders that customers look for used cars of importers due to the competitive price and quality. This not only helped to create healthy competition in the country but also benefits customers,” Peiris said. Expressing its stance on the proposal made by certain agents of brand new vehicles to the government to apply the Brake Horse Power (BHP) as the basis for calculating the duty of vehicles instead of the engine capacity, VIASL said calculating the duty based on BHP is as complicated as the valuation based calculating method used in the past. - LF 

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