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The government has halved excise duty on vehicles, abolished a 15 per cent surcharge on all imports and reduced duty on electrical appliances.
As for excise duty reductions on vehicles, a section of society with purchasing power will certainly benefit but their gain will be the State coffers` loss. Local automobile dealers who have been grumbling all these years about a drop in sales must be beaming from ear to ear! For their business is bound to improve, though they still have to pay other import duties which haven t come down.
We, too, have called for a reduction in duties on vehicles while opposing duty free concessions to political leeches. On May 03, 2010 we said in these columns, ` they [politicians] must be pressured to reduce unconscionably high duties which have rendered brand new vehicles unaffordable to many people and thereby turned the country into a dump yard for imported second hand vehicles heavy on fuel and in need of very expensive repairs.`
With the money a person usually spends on a `reconditioned` vehicle, he could buy a brand new one, if the exorbitant duties thereon are reduced drastically. One`s mind boggles at the manner in which duties are slapped on vehicles in this country one has to pay duty even on a rear windscreen heater! Sri Lanka is known for being penny wise and pound foolish!
However, it is hoped that duty reductions etc will not cause us to be pummelled by a tsunami of discarded vehicles from abroad. The government`s aim should be to make brand new vehicles affordable to the people and not to promote the importation of reconditioned or `as-it-is` automobiles from vehicle graveyards in other countries. We learn that those engaged in dumping discarded vehicles here have already jacked up prices by as much as Rs. 300,000 per unit!
Price reductions will automatically translate into an increase in demand for automobiles. That is more vehicles will come in sending the country`s fuel bill through the roof and aggravating traffic congestion. Is the government prepared to tackle this kind of fallout?
On the other hand, how does the government propose to make up for the duty reductions etc? It seems to think that an increase in volumes will compensate for losses. But what if it does not happen that way? Will the government be compelled to increase indirect taxes? Or, will there be an `upward revision` of fuel prices? Will we find ourselves in a situation where the ultra rich pay less for their SUVs while the ordinary masses pay more for essential commodities and services?
The million dollar question is whether excise duty on luxury vehicles used by the wealthy who squander one million rupees per head on tickets for IIFA and other such events should also be reduced at the expense of the public purse.
The price of an SUV may come down by 5 to 6 million rupees, according to Chairperson of the Ceylon Motor Traders` Association, Zeeniya Rasheed, as we report today. (Excise duty does not apply to commercial vehicles and its reduction will have no impact on their prices.)
Most of all, how a reduction in excise duty etc and the resultant increase in vehicle imports will affect the country`s foreign reserves remains to be seen.
A vast majority of people in this country are poor and they cannot afford even a bicycle. Most of them are dependent on Shank`s mare for conveyance. So, they would not benefit at all even if vehicles were allowed to be imported totally duty free. They will gain only if indirect taxes on essential commodities and services are reduced and the State spends more on social welfare and developing public transport and the like. It was only the other day that the government re-imposed taxes on essential commodities, having waived them in view of the presidential and parliamentary elections! Worse, the Health Ministry, for want of funds, could not clear, until last month, a consignment of vital drugs stuck in the Colombo Port for weeks!
So, while duties on vehicles, electrical goods etc are reduced and steps taken to mitigate any adverse fallout, it behoves the government to bring relief to the masses to whom even a loaf of bread is a luxury.
Source :- lankanewspapers.com
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