By: Staff Writer
June 10, Colombo (LNW): Sri Lanka’s vehicle importers have raised serious concerns over persistent irregularities in Customs procedures, outdated vehicle valuation regulations, and large-scale tax evasion under former government-backed import schemes. These issues come to light just as the Treasury projects vehicle import tax revenue to reach between Rs. 300–450 billion in 2025, with a strong surge in Letters of Credit (LCs) opened for vehicle imports.
According to Central Bank of Sri Lanka (CBSL) data, the government recorded a 19.42% rise in revenue and grants during the first four months of 2025, reaching Rs. 1,454.67 billion—up from Rs. 1,218.07 billion during the same period last year. Tax revenue alone hit Rs. 463.19 billion in April, largely due to the reopening of vehicle imports. Despite a primary account surplus of Rs. 532.73 billion, the overall budget deficit stood at Rs. 261.61 billion.
However, Vehicle Importers’ Association of Lanka (VIAL) President Indika Sampath Merenchige criticized authorities for relying on a 2016 gazette for vehicle valuation, calling it outdated and ill-suited to today’s market. He urged immediate regulatory reforms and stakeholder engagement, pointing out that regulatory gaps continue to be exploited.
“All vehicle importers are still bound by the 2016 valuation framework. These outdated guidelines, coupled with a lack of consultation, make the system prone to misuse,” Merenchige said, also highlighting that only registered parties are legally permitted to import vehicles.
The situation is further compounded by revelations of massive tax evasion in previous EV import schemes. A parliamentary Committee on Public Accounts (COPA) investigation found the former Secretary to the Ministry of Labour and Foreign Employment responsible for losses exceeding Rs. 2 billion. This was tied to misused permits for fully electric vehicles (EVs), originally meant for Sri Lankans working abroad and sending remittances.
The Auditor General reported that tax revenue losses of Rs. 2.42 billion occurred due to an increase in the luxury tax exemption threshold from Rs. 6 million to Rs. 12 million for 921 EVs. Some permits were issued to individuals who had never traveled abroad or had minimal overseas experience, undermining the program’s intent.
COPA recommended disciplinary action and an internal probe into the irregularities, with Customs confirming fraudulent activities and acknowledging significant losses. Only four of the 925 vehicles remain under investigation, while the rest were released.
Separately, another tax evasion scandal involved two vehicle assembling companies that received excise duty concessions by violating Customs Ordinance provisions. These firms assembled 326 vehicles in bonded warehouses and sold them at inflated market prices, causing an estimated loss of Rs. 103.8 million in 2023.
One such company released vehicles valued at Rs. 6.3 million from Customs and sold them at over Rs. 11.5 million, reaping huge profits while depriving the state of rightful revenue. The matter is now under review by the Attorney General’s Department.
As scrutiny intensifies, vehicle importers are calling for urgent reform, transparency, and strict enforcement to protect both fair traders and state revenue.
