Sri Lanka will use letters of credit (L/Cs) opened for imported automobiles to provide incentives for buyers of electric vehicles and disincentives for purchasers of hybrid fossil fuelled-electric vehicles.

The move follows finance minister Mangala Samaraweera's announcement in Sri Lanka's budget earlier this month of what are effectively tax concessions on fully electric vehicles.

Tax differentiation

In the budget it was announced that the import tax on hybrid gasoline-electric vehicles has gone up by as much as the equivalent of US$2,800.

In contrast, the import tax on some fully electric motor vehicles been slashed by the equivalent of US$980, reflecting the government's policy of promoting electric over internal combustion powered vehicles.

L/C arrangements

Under the new scheme, higher car taxes will apply to L/Cs opened after 5 March when Samaraweera presented his budget to the Sri Lankan parliament.

Vehicles imported on L/Cs opened before the budget will be taxed at the old rate.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.