The Hon. Nimal Palihena

¶ 01 Hon. Presiding Member, today we are debating the regulation in the Gazette that amends the tax structure we approved—specifically, a fresh round of revisions to taxes on electric vehicles under the Excise (Special Provisions) Act, No. 13 of 1989. The main objective is to narrow the large disparity in tax rates between diesel, petrol, hybrids, and electric vehicles by increasing EV tax rates to a fairer level.

¶ 02 Even with this increase, EV tax rates remain lower than those for petrol, diesel, and hybrids. For example, for a 1,500 cc petrol car with CIF of Rs. 5 million, the tax is 210%; the same-category hybrid is 310%; but a 0–100 kW electric vehicle is 70%. This shows EVs still benefit from lower rates relative to others.

¶ 03 Tax is government revenue; import duties are one channel for Treasury income. Given the situation, imports of certain vehicles were first allowed only for essential public services, industry, and agriculture—buses and machinery—along with specific rates. Now, as a third step, we allow broader imports to facilitate personal mobility, but with limits to avoid excess. There are reasons:

¶ 04 Several domestic firms already produce or assemble EVs. If we can travel in locally made vehicles, we avoid spending scarce dollars. Protecting foreign reserves is crucial as our reserves, though recovering post-bankruptcy, are still limited. Therefore, we must avoid unnecessary vehicle imports while still allowing those who can afford them to import within limits, and enabling industries to procure needed vehicles after a long hiatus. The world is changing; new vehicle types emerge; people are getting used to them—so some space is needed. Simultaneously, we see a positive trend of our industrial sector expanding.

¶ 05 Beyond import duties, VAT under the IMF programme was extended to items including food, medicines, and school supplies by the previous government; even now the Government must continue under those commitments. However, to ease the burden, relief has been provided through other means for schoolchildren and the public. To do all this, the Government must reach firm revenue levels and manage them.

¶ 06 We have diverted to revenue-generating projects, but many are not yet at the income stage—we have been in office only six months. Many State enterprises had long run at losses or been misused; they must be restructured. The Opposition says there is no plan and cites the salt issue and others. Let me clearly state: some plans fail due to factors beyond our control. We must address these going forward. A planned State should keep contingency stocks for emergencies. Salt production, for instance, needs time—at least seven months. Our Government has only been here six months. That does not mean we ignored salt. The State must intervene appropriately while allowing necessary imports under exigent circumstances. If foreign reserves deplete too fast, we may lack forex for essentials, leading to worse problems. Managing this is not easy—the country fell on all fronts. I believe the Government must continue taking step-by-step measures so as not to burden people, while improving public services and living standards.

¶ 07 Thus, the current EV tax measure is designed to be fair relative to other vehicle classes and not impose undue pain. Where further adjustments are needed, we will act responsibly. Thank you.