2017 Apr 11
by Samad Shiraz
Everyone loves cars. They help us get around from place to place really fast (or moderately fast, depending on the speed limit) and are generally comfortable. What people don’t love is paying those pesky taxes. According to a recent study, it was found that Sri Lankans, on average, pay around 130-300% (depending on the class of vehicle) more than the original price of a vehicle due to taxes. That sounds a bit harsh doesn’t it? That’s because it is.
These days, people’s wallets are just not that full anymore with Sri Lanka’s cost of living gradually increasing as the years go by. The current appreciation of international currencies don’t help either. According to Vehicle Importers’ Association of Sri Lanka (VIASL), with the Japanese Yen rising in value, a Rs.5 million vehicle would cost Rs.200,000 more! This isn’t just a problem for the average family vehicle buyer, but for the daily driver too.
The new credit limitations with regards to vehicle financing are truly detrimental to individuals meaning to purchase a three-wheeler or a mini-lorry for their delivery or “bakery on wheels” businesses. These credit restrictions coupled with increased duty on vehicles make it very difficult for people aiming to get into such a sector, which is detrimental to the economy in the long term. After all, unemployment isn’t a very fun prospect for most people. This in turn has led to lower registrations for vehicles this past month. Three-wheelers have been hit the hardest as registrations for such vehicles have been spiralling downwards from 3,327 to a mere 903 units due to the increase of the Loan-To-Value ratio to 25%. That is to say that many simply would not be able to pay the loans back on time.
For example, let’s say you and I want to buy a shiny, new toy car. It’s the talk of the metaphorical town and it’s being sold at about Rs.500 everywhere. You and I think that’s quite a bargain as we have Rs.500. So we journey to our nearest toy store to purchase this affordable toy car only to find that it costs Rs.1,500 here. The shopkeeper offers to let us buy the vehicle on credit so we can pay him back over time. That sounds good right? Except it isn’t really. He demands nearly a quarter of the price of the vehicle every week, which is an outrageous amount to pay for a vehicle in such a short period of time. So we decide not to get the toy car altogether. Not only does this affect us as we don’t have a new, shiny toy car to play with, but the shopkeeper loses out too as he does not earn anything. Simply put, that is the current situation in our country.
This raises the question however; if individuals have so many restrictions placed on them, how can they contribute to the growth of the economy? Such blatant disregard for the common consumer in favour of raising taxes only hurts the country’s economy and its citizens as a whole. This could have very lasting and grave impacts on our country as a whole. As the government relies on the revenue it generates from taxation, the reduction in the purchasing of vehicles, they would naturally increase taxes again; which would further deter individuals from purchasing vehicles in Sri Lanka. The depreciation of our Sri Lankan Rupee against the Yen and U.S. Dollar doesn’t help either. At this rate the taxes and prices of vehicles are going to continue to increase exponentially, leaving the government with less money and us with no shiny toy cars.