Sri Lanka import duty on vehicles to grow new rent seeking sector
- CNL Reporter
- March 18, 2025
- Business News
- Sri Lanka import duty on vehicles to grow new rent seeking sector
- 0 Comments
Import duties on finished vehicles brought to Sri Lanka, apparently as part of a balance of payments measure, has triggered fears of an expansion of a brand new rent seeking business sector and tax losses, though its extent is unclear as yet.
Sri Lanka imposed a 30 percent tax on vehicles this year over fears that car imports may lead to loss of reserves or hurt the exchange rate or foreign reserves.
It is not known why macro-economists believe car imports should hurt the exchange rate more than some other type of import, but such Mercantilist doctrines have driven Sri Lanka’s policy for many decades, with oil and gold also being targets of such beliefs at different times, analysts have pointed out.
“The introduction of an import duty will help moderate the impact on the exchange rate,” according to documents released on policy discussions with the International Monetary Fund.Sri Lanka now has a large number of sectors where domestic producers are selling goods at high prices under cover of import duties gauging the public, arbitraging the tax difference as profits.
