High earnings spark tax cut debate, but Treasury remains firm on fiscal discipline
The Sri Lankan Government has earned a substantial Rs. 136 billion in revenue from motor vehicle imports between January and April 2025, according to figures disclosed by Sri Lanka Customs. The revenue comprises collections from Value Added Tax (VAT), Customs Duty, and the Luxury Tax.
The update was shared during a session of the Committee on Public Finance (CoPF) held on Tuesday (3), chaired by MP Dr. Harsha de Silva. Officials confirmed that the government is on track to meet its ambitious annual target of Rs. 450 billion from vehicle import-related revenues.
Deputy Treasury Secretary A.K. Seneviratne revealed that a total of 596 Letters of Credit (LCs) have been opened so far this year, facilitating the clearance of $272 million worth of vehicles. He noted with optimism that the Government currently earns $1.70 for every dollar spent on vehicle imports—surpassing the original projection of $1.50.
Amid the promising figures, Dr. de Silva humorously asked whether this higher-than-expected income might pave the way for lower taxes on vehicle imports. However, Seneviratne quickly clarified that any such decision is currently off the table, emphasizing the need to adhere to broader fiscal planning and long-term estimates.
The recent uptick in imports follows a phased relaxation of previous restrictions. On 14 December 2024, the Government resumed imports of vehicles used for special services. By 1 February 2025, it had fully lifted the temporary suspension on imports of vehicles for goods transport and private use. However, new regulations were implemented to avoid excessive import volumes, safeguard foreign exchange reserves, and maximize government revenue.