Business

Fuel consumption-based carbon tax in 2020

By Madhusha Thavapalakumar

The carbon tax on vehicles, which is currently based on engine capacity, is set to be revised to take into account the amount of fuel consumed by the vehicle instead of the engine capacity of the vehicle.
The revision is most likely to be included as a budget proposal in 2020 and the Treasury and the Ministry of Transport and Civil Aviation are in preliminary-level discussions in this regard at the moment.
Speaking to The Sunday Morning Business, an official from the Ministry of Finance noted that the move comes following continuous agitation by the general public regarding the current method used in levying the carbon tax. The existing tax is levied based on neither carbon emissions nor the amount of fuel consumed by the vehicle, thereby failing to penalise the people that contribute most to air pollution.
The official noted that the revised tax based on the amount of fuel consumed by the vehicle is a system modelled on international best practices. As of early 2018, more than 25 national or subnational carbon tax systems were implemented or scheduled to be implemented around the world.
The carbon tax on all registered motor vehicles excluding electric vehicles came into effect from 1 January this year under the Finance Act No. 35 of 2018. According to the Act, the registered owner of any vehicle has to pay the tax every year, other than the first year of registration of the motor vehicle, to the Divisional Secretary on or before the due date of the annual renewal of registration. Thereafter, the Divisional Secretary remits the collected carbon tax to the Commissioner General of the Department of Motor Traffic (DMT).
Presenting the Budget 2018, Minister of Finance Mangala Samaraweera noted that the carbon tax was expected to generate government revenue of Rs. 2.5 billion, which would be used to protect the environment.
At the moment, carbon tax is being collected based on the vehicle’s engine capacity depending on the age and fuel type used by the vehicle. Accordingly, hybrid vehicles using petrol or diesel based on their engine capacity manufactured less than five years ago are being charged Rs. 0.25 per cubic centimetre, while engines manufactured between five and 10 years ago are being charged Rs. 0.5, and engines manufactured more than 10 years ago are being charged Rs. 1.
Other vehicles using petrol or diesel based on their engine capacity manufactured less than five years ago are being charged Rs. 0.5 per cubic centimetre, while engines manufactured between five and 10 years ago are being charged Rs. 1, and engines manufactured more than 10 years ago are being charged Rs. 1.5.
Passenger transport buses manufactured less than five years ago are being charged Rs.1,000 while buses manufactured between five and 10 years ago are being charged Rs.2,000, and buses manufactured more than 10 years ago are being charged Rs.3,000.
Accordingly, the applicable rates for a motorcycle, car, and a passenger bus would be around Rs. 0.17, Rs. 1.78, and Rs. 2.74 per day, respectively.
All attempts to reach Ministry of Transport and Civil Aviation Secretary L.P. Jayampathy to obtain further information about the tax revision were unsuccessful while no other ministry official was willing to comment.