A report by the National Audit Office reveals that the Government has lost Rs.1,384 million in tax revenue due to an increase in the luxury tax exemption limit from Rs.6 million to Rs.12 million. This tax exemption was granted for 510 vehicles imported under a scheme that allowed overseas workers to import electric vehicles.
The exemption limit was initially Rs. 6 million and raised to Rs. 12 million.
The scheme, launched in 2022 by the Labour and Foreign Employment Ministry aimed to incentivise foreign remittances by Sri Lankan migrant workers. According to the special audit report, the scheme granted 1,077 permits between September 22, 2022, and June 30, 2024. Of these, 77 permits were later canceled, and only 510 permit holders imported vehicles.
The report further highlights that out of the 510 vehicles imported, only 375 had been registered with the Department of Motor Traffic by June 30, 2024. During this period, US$ 121,505,640 was received in foreign remittances under the scheme, while USD 24,100,757 was used to import the vehicles.
Significant lapses in internal controls and irregularities in the permit issuance process were also identified. Key administrative procedures such as the acceptance and verification of applications, issuance, and cancellation of permits were reportedly handled unethically by a few officials of the Ministry.
The Ministry failed to ensure compliance with conditions for permit eligibility. For instance, permits were issued to four individuals whose foreign employment status could not be verified. These individuals had received US$ 445,942 in foreign remittances, yet the Ministry did not confirm the legality of these funds.
The audit also found that the duration of foreign employment required for eligibility was not clearly defined in official circulars, leading to permits being issued to individuals with minimal overseas employment or intermittent foreign travel. The lack of coordination with relevant authorities, such as the Treasury’s Department of Trade and Investment Policy or the Controller of Imports and Exports, was flagged as a violation of proper governance and accountability standards. The report underscores the need for transparency and stricter oversight to prevent misuse of government resources and policies in the future.
