The Sri Lanka vehicle import tax system faces a WTO complaint from the United States, which says the country’s vehicle valuation method breaches trade rules.
The Sri Lanka vehicle import tax system has come under international scrutiny after the United States lodged a complaint with the World Trade Organization (WTO), arguing that the taxation and valuation methods applied to imported vehicles are inconsistent with international trade standards.
The disclosure was made by Department of Customs spokesperson Chandana Punchihewa during a media briefing held at the Government Information Department.
He explained that when all applicable duties and levies are combined, the total tax burden on some imported vehicles can exceed 250 percent.
WTO Questions Sri Lanka Vehicle Import Tax Method
Punchihewa also noted that some importers attempt to undervalue vehicles in an effort to reduce the amount of tax they are required to pay.
To address that issue, the government introduced a special vehicle valuation system in 2016, under which the taxable value of imported vehicles is determined at 85 percent.
According to the complaint submitted by the United States, this valuation method is inconsistent with the international trade agreements that Sri Lanka has entered into through the WTO framework.
Officials are currently engaged in discussions with the relevant stakeholders to resolve the matter while considering Sri Lanka’s obligations under international trade rules.
Government Weighs Revenue Impact
The Customs Department spokesperson warned that revising the existing taxation method to fully comply with international standards could result in a reduction in government tax revenue.
He said the government is therefore working on developing alternative frameworks that address the WTO concerns while managing the potential impact on state revenue.
The discussions remain ongoing as authorities seek a solution that balances international trade commitments with the country’s fiscal requirements.
The basic value required for customs duty calculation is overated for most JDM and imports from exporting countries. WTO requires the MANUFACTURERS VALUE whereas SRI LANKA Customs takes the WEBSITE VALUE which is illegal and depreciates it only by 15% which is far too low. SINGAPORE also has the same system and they depreciate it by 20% from the WEB NETT PRICE EXCLUDING TAXES which is correct. Brand new vehicle importers always interfere with PARALLEL IMPORTS which they have no authority to do so, they do this to protect there interest.