Sri Lanka’s longest-standing automotive industry association has intensified calls for the government to reverse what it describes as an economically unsound tax concession on used vehicle imports, warning that the policy is quietly eroding public finances and skewing market competition.
The Ceylon Motor Traders’ Association (CMTA), an affiliate of the Ceylon Chamber of Commerce, is urging policymakers to scrap the 15 percent depreciation allowance applied to the cost, insurance and freight (CIF) value of used vehicles when calculating import duties. According to the association, the concession lacks a defensible economic rationale and results in substantial revenue losses for the state.
Despite repeated submissions through national budget consultations, no official position has yet been announced by the authorities. However, the CMTA argues that the issue has grown more pressing as the nature of used vehicle imports has changed significantly in recent years.
Many of the vehicles currently entering the country under the “used” category, the association notes, have negligible mileage and are priced close to brand-new units on a CIF basis. Yet they continue to benefit from reduced tax liabilities due to the depreciation allowance, allowing them to undercut authorised dealers of new vehicles.
This disparity, the CMTA says, has created an uneven competitive landscape, where similar-value imports are taxed at markedly different rates. While acknowledging the government’s objective of improving vehicle affordability, the association cautions that tax relief measures must be transparent, targeted and economically justified.
If affordability is the policy goal, the CMTA suggests that comparable relief could be extended to new vehicles sold through authorised agents. Such vehicles, it points out, typically include long-term manufacturer warranties, which reduce lifetime maintenance costs and conserve foreign exchange, as repairs and replacement parts are borne by overseas manufacturers rather than local importers.
The association has also reiterated provisions in a 2013 gazette that depreciation should be applied using a structured age-based scale, capped at 10 percent, to prevent manipulation. In its view, the continued blanket application of a 15 percent allowance undermines both revenue integrity and regulatory discipline.
