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Check the value of vehicle policy coverage – IASL

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Tax model distorting and driving perverse outcomes in the vehicle industry

The Insurance Association of Sri Lanka (IASL) has noted that due to inflation, sharp foreign exchange decline, banning of imports and other economic factors there has come about a need for customers to get in touch with their insurance agents to make sure that the full value of their vehicles is covered by their current insurance policy.

IASL has been pushing this message in the general interests of the broader industry. Parallel vehicle importer, R. Subasinghe noted that Sri Lanka had always had an anomalously functioning vehicle market. He noted that he could import second-hand vehicles from Japan and that they would not depreciate at the same rate when brought into Sri Lanka due to high one-off taxes.

Subasinghe called on the government to follow a Singaporean tax model for vehicles. He noted that before the unit rate there was widespread corruption through under-invoicing there. He noted that with a system that garners the majority of revenue from vehicles on an ongoing basis with a high revenue license fee and congestion charge there would be more tax revenue collected and less anomalous pricing.

During the recent economic crises, many people associated with Subasinghe speculated against the LKR by purchasing vehicles. He noted that if the government was to increase the Revenue License fee 25 times over it would still not account for the increase in value of the lowest-value vehicle during the crisis.

Subasinghe called on the government based on unit rate capture back some of the value that has accrued to speculative vehicle holders. Subasinghe regretted that the industry had become a huge haven for tax evasion. Congestion charges would help redistribute the traffic more efficiently.

Subasinghe noted that problems with the Industries Ministry and the local vehicle assembly sector would quickly dissipate if the tax collection burden fell on the revenue license system. Major concerns about honestly evaluating the level of value addition would quickly dissipate. Vehicle assembly can be carried out by many more players in the market. He further noted that with the lack of vehicle imports the government has lost a huge revenue source and should look to build it back up again as opposed to placing excessive taxes on essentials. DP

Monday, December 5, 2022 – 01:00

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