Vehicle Import Tax Break Costing Government Billions in Lost Revenue

The Ceylon Motor Traders' Association (CMTA) has raised concerns about a tax loophole in the country's vehicle import regime that extends preferential treatment to commercial importers while leaving ordinary consumers without equivalent relief. The depreciation deduction, applied to the customs valuation of imported vehicles, reportedly allows the trade to reduce their tax obligations significantly.

According to the CMTA, this mechanism is generating substantial revenue losses for the government that could otherwise be directed toward public services and infrastructure. The association estimates the annual shortfall could reach Rs. 100 billion to Rs. 120 billion by 2026, representing a considerable fiscal burden amid Sri Lanka's economic recovery efforts.

The concession creates a competitive imbalance within the motor industry and raises questions about the equity of the tax system. While commercial importers benefit from the depreciation allowance, private consumers purchasing imported vehicles do not receive equivalent tax relief, creating a two-tiered structure that critics argue lacks transparency and fairness.

The issue comes as Sri Lanka continues efforts to strengthen its tax base and improve revenue collection following recent economic challenges. The CMTA's intervention suggests growing pressure for a comprehensive review of vehicle import taxation policies to eliminate unintended loopholes and ensure more equitable treatment across all market participants.