By: Isuru Parakrama
December 12, Colombo (LNW): A recent audit by the National Audit Office has revealed that the Sri Lankan government has lost approximately Rs. 1,384 million in tax revenue due to a significant increase in the luxury tax exemption limit for electric vehicle imports.
This exemption, initially set at Rs. 6 million, was doubled to Rs. 12 million, resulting in financial losses for the state.
The controversial scheme, which allowed Sri Lankan migrant workers to import electric vehicles, granted the exemption to 510 vehicles, raising questions about the effectiveness and oversight of the programme.
Launched in 2022 by the Ministry of Labour and Foreign Employment, the initiative was designed to incentivise remittances from Sri Lankan workers abroad by encouraging them to import electric vehicles.
According to the audit report, the scheme issued a total of 1,077 permits between September 2022 and June 2024. However, 77 of these permits were later cancelled, and only 510 of the permit holders proceeded with importing vehicles.
The report further indicates that by June 2024, only 375 of the imported vehicles had been successfully registered with the Department of Motor Traffic.
During this period, the scheme facilitated foreign remittances amounting to approximately US$ 121.5 million, while US$ 24.1 million was spent on the importation of the vehicles.
One of the key findings of the audit was the identification of significant lapses in internal controls and irregularities in the permit issuance process.
Several administrative procedures, including the acceptance and verification of applications, as well as the issuance and cancellation of permits, were handled unethically by some officials within the Ministry.
The audit also highlighted that the Ministry had failed to ensure compliance with the necessary eligibility criteria for the permit holders.
For example, permits were issued to four individuals whose foreign employment status could not be verified.
Despite receiving US$ 445,942 in foreign remittances, the Ministry did not carry out the necessary checks to confirm the legality of these funds.
Additionally, the report pointed out that the criteria for the duration of foreign employment required for eligibility were not clearly defined in the official circulars.
This lack of clarity resulted in permits being granted to individuals with minimal overseas employment or those with sporadic foreign travel.
The audit also noted a lack of coordination between the Ministry and other key authorities, such as the Treasury’s Department of Trade and Investment Policy and the Controller of Imports and Exports, which led to further breaches in governance and accountability.
The audit report calls for greater transparency and stricter oversight to ensure that such schemes are properly managed and do not result in the misuse of government resources or policies.
