Vehicle importers have used a legal loophole to undervalue vehicles imported under the electric vehicle import licence scheme for migrant workers to avoid the luxury tax causing the loss of millions to the treasury, the Committee on Public Finance (COPF) revealed.
Accordingly, it was revealed that over 1,000 electric vehicle permits have been issued under the scheme thus far while 298 electric vehicles have been imported as of the end of December 2023.
COPF revealed that out of the total number of electric vehicles imported as of the end of December, 51% of the total value of the vehicles are in 50 vehicles which includes vehicle brands such as Tesla and Porsche.
An investigation by Sri Lanka Customs also revealed that facilitators appointed by the Ministry of Foreign Employment to import electric vehicles on behalf of migrant workers have used a legal loophole where the value of the vehicle is reduced by registration and deregistration in another country after importing it from the country of manufacture and thereby avoid the luxury tax when the vehicle is finally imported to Sri Lanka.
The Customs report said that the minimum gap between the actual price of the electric vehicle and the declared price after the registration and deregistration process in another country is 15% while the luxury tax threshold for these vehicles is approximately Rs.12 million.
Through under-invoicing the vehicles, the price of the vehicle has been brought below the luxury tax threshold. At the same time, only the excise duty which is charged based on the engine capacity, has been paid by these importers.
The Customs told COPF that when the investigations were conducted back in October and November last year, it was found that offences were committed in importing all 130 plus vehicles which were imported at that time.
Accordingly, the Customs revealed that the Department has recovered over Rs. 400 million from mitigated forfeiture of the electric vehicles.
The COPF issued a directive to the Finance Ministry to close the legal loophole and asked the Finance Ministry to publish the list of the permits issued under the scheme on the website to enhance transparency.