Registrations of brand new Mercedes cars rose 109 percent to 23 percent in January 2013 from a year earlier.
Sri Lanka hiked taxes on cars in the first quarter of 2012, in what some analysts and the International Monetary Fund said was an inappropriate policy response (Sri Lanka trade controls take IMF by surprise).
Sri Lanka’s exchange rate came under pressure and imports surged due to tens of billions of rupees printed (central bank credit) to sterilize foreign exchange sales, during a credit bubble worsened by loans taken to manipulate energy tariffs.
At the time analysts warned that the move would deprive the state of tax revenues.
Though taxes on ordinary citizens’ cars are high, Sri Lanka’s elected political class and state functionaries get tax free and tax slashed cars.
This year state functionaries were allowed to sell their tax slashed permits in the secondary market by the rulers. The luxury cars are believed to be imported through permits sold by state workers.
New registrations of Maruti-Suzuki cars owned by less affluent ordinary citizens fell 84 percent to 190 in January 2013 from a year earlier, the data showed.
Taxes on small cars were raised twice, drawing protests from Indian automakers that it was targeted at them.
Models of Perodua, a Malaysian small car brand also fell 68 percent to 102 from 327 in January.