Gammanpila raises red flag over tax waiver for EV assembly ventures

Tuesday, 24 October 2023 01:17 - - {{hitsCtrl.values.hits}}

Pivithuru Hela Urumaya (PHU) leader and Member of Parliament Udaya Gammanpila yesterday made startling claims, suggesting Government involvement in a potentially vast car smuggling operation.

Speaking to journalists yesterday, he asserted that a Cabinet paper, presented by the President in his capacity as the Investment Promotion Minister opens the door to a scheme more significant in scale than the infamous Central Bank fraud.

“The paper, dated 8 September 2023, proposes exempting electric and hybrid vehicle parts from import taxes, a commendable move on the surface. However, it applies to semi-knock down (SKD) vehicles, meaning that if essential components are removed, vehicles can be brought into the country tax-free,” he said.

Gammanpila claimed the Cabinet paper, though requiring a minimum investment of $ 50 million in a venture, does not stipulate a minimum value for parts assembled in the country, potentially providing a loophole for tax evasion.

“This benefit is reserved for entities with pre-existing vehicle assembly agreements with the Board of Investment (BOI), raising questions about the intended beneficiaries,” he pointed out.

Gammanpila alleged the President submitted another Cabinet paper as Investment Promotion Minister in August 2023, favouring Senok Automobile Assembly Ltd.

Western Automobile Assembly Ltd., formerly known as Senok Automobile Assembly Ltd., signed an agreement with BOI on 13 August 2015 to assemble diesel vehicles of engine capacity from 1,000 cc to 2,000 cc using imported brand new SKD provided by technical contributor, Volkswagen AG of Germany with an envisioned investment of $ 26.5 million as a local investment.

“This proposal aims to annul the existing agreement, allowing the company to import vehicle parts duty-free, resulting in a significant loss of Government revenue,” he said.

Gammanpila said the implications of such actions are significant, particularly in light of the strain on public services. “Healthcare and education have faced hardships as professionals have left the country due to increased taxes. While efforts to meet commitments to the International Monetary Fund (IMF) have led to higher tax revenues than projected, the Government’s concessions to select companies threaten to shift the burden back onto professionals,” he stressed.

He also raised concerns about favouritism towards internationally renowned Western brands, potentially at the expense of Asian manufacturers.

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