Sri Lanka is revamping its car import policies as part of an agreement with the International Monetary Fund (IMF):
- Ending Tax Breaks for Special Groups: The government will eliminate tax breaks on car imports for certain groups, including civil servants. This aims to prevent revenue loss when import restrictions are lifted.
- Relaxation for Commercial Vehicles: Restrictions on importing commercial vehicles will be eased by June 2024 to support economic recovery.
Current System:
- Tax Cuts: State workers receive tax-reduced car imports, while the elected ruling class enjoys completely tax-free vehicles.
- Income Tax: Previously, only ordinary citizens and state workers paid income tax. Equal taxation was restored under President Mahinda Rajapaksa.
Concerns and Historical Context:
- Elite Privilege: Public criticism has grown against tax breaks for specific groups, seen as unfair to the general population burdened with taxes.
- Tax Exemptions:
- A past proposal exempted the President from income tax.
- Revenue officials collecting taxes were once exempt themselves.
- Sri Lanka’s Central Bank staff faced criticism for high salaries while not paying taxes themselves (since addressed).
Additional Points:
- Legislators and ministers get pensions after just 5 years, with some extending these benefits to personal staff (appointed family members).
Overall, Sri Lanka is moving towards a fairer car import policy and eliminating discriminatory tax breaks.