There are no plans to impose additional restrictions or introduce new tax measures specifically targeting vehicle imports, Treasury Deputy Secretary Ananda Kithsiri Seneviratne said, amid speculation that fiscal and external sector pressures could prompt fresh curbs.
Responding to queries from The Sunday Morning, Seneviratne said: “Vehicles already attract the highest levels of taxation in the country and so excessive taxes could become counterproductive. The principle of taxation must consider value for money.”
He explained that if taxes exceeded the perceived value of a good, consumers would simply exclude it from their budgets, rendering such measures ineffective.
“To my knowledge, no decision has been taken regarding further moves specific to vehicle imports. There hasn’t been any movement on that front so far,” he added.
Seneviratne’s comments come against a backdrop of renewed public and industry discussion over the future of vehicle imports, particularly in light of Sri Lanka’s ongoing engagement with the International Monetary Fund (IMF), concerns over revenue performance, and pressure on foreign exchange reserves following recent shocks to key dollar-earning sectors.
While the Deputy Secretary downplayed immediate policy shifts, Ceylon Automobile Importers’ Association (CAIA) President Prasad Manage warned that the evolving economic context could still lead authorities to consider administrative or financial controls if external sector pressures intensified.
Manage told The Sunday Morning that although no official communication had been received from the Government, the possibility of renewed restrictions could not be ruled out, given recent developments affecting foreign currency inflows.
He noted that by the end of November, the segment of the foreign reserves spent in the purchase of vehicles had reached nearly $ 1.7 billion, comfortably above the allocated limit of $ 1.2 billion set by the Central Bank. He said these gains were now under strain following the impact of a recent natural disaster, which has dealt a blow to tourism – one of the country’s most significant sources of foreign exchange.
“The major impact has been on tourism and dollar inflows,” Manage said, adding that this could place additional pressure on the Government to conserve foreign exchange. “In that context, restrictions on vehicle imports may be considered, even though we have not been officially informed of any such decision.”
Manage said that if authorities were to act, the measures could take several forms, though he stressed that these were speculative rather than confirmed. Possible options include increasing margin requirements for Letters of Credit (LCs) used in vehicle imports or introducing technical restrictions based on engine capacity.
“One could see higher LC margins or limits on vehicles above a certain engine capacity, such as 1,000 cc,” he said. “These are measures that have been used before, but I cannot confirm that anything like this will happen.”
On the concerns surrounding the attainment of foreign reserve targets of the Central Bank of Sri Lanka (CBSL), Seneviratne stated that there was no immediate information to confirm or deny if the foreign reserve targets had been met.
The CBSL stated that the official statistics regarding Sri Lanka’s foreign reserve performance would be revealed in the coming week in compliance with the Special Data Dissemination Standard (SDDS), an international benchmark established by the IMF to enhance transparency.