CMTA Warns of Rs. 40 Billion Revenue Loss in 2026 Unless Tax Loophole on Vehicle Imports is Closed

The Ceylon Motor Traders' Association (CMTA), Sri Lanka's longest-standing automotive industry body and an affiliate of the Ceylon Chamber of Commerce, has sounded the alarm over a significant fiscal vulnerability that it says could cost the government a further Rs. 40 billion in lost revenue during 2026 if left unaddressed.

The Core Issue: A 15% Depreciation Allowance Under Fire

At the heart of the CMTA's concerns is a 15% depreciation provision currently applied to vehicle imports, which the association argues is being exploited to artificially deflate the customs value of imported vehicles. This, according to the CMTA, results in substantially lower duty assessments than what the government is legitimately owed, creating a sizeable and recurring gap in state revenue collection.

The association is calling on the relevant authorities to urgently remove this depreciation allowance, warning that continued inaction will compound losses that have already been accumulating within the sector.

Mounting Pressure on Public Finances

The warning comes at a particularly sensitive time for Sri Lanka, which is navigating a fragile economic recovery under the terms of its International Monetary Fund programme. Revenue mobilisation has been identified as a cornerstone of the country's fiscal consolidation strategy, making the CMTA's alert all the more significant.

Industry observers note that leakages of this scale — running into tens of billions of rupees — directly undermine the government's ability to meet its revenue targets and sustain reform momentum.

CMTA's Call for Immediate Action

The CMTA has urged policymakers to treat the removal of the 15% depreciation clause as a matter of priority ahead of 2026, arguing that the fix is both straightforward and consequential. The association maintains that the measure would:

• Prevent an estimated Rs. 40 billion in additional revenue leakage projected for 2026
• Create a more level playing field for compliant importers and established motor traders
• Strengthen the integrity of the customs valuation process for vehicles
• Support the government's broader fiscal consolidation and revenue enhancement goals

The CMTA, as the senior-most automotive association in Sri Lanka, has consistently advocated for a transparent and equitable regulatory environment within the motor trade industry.

Wider Implications for the Motor Trade

Beyond the immediate revenue concern, the CMTA's intervention highlights longstanding structural issues within Sri Lanka's vehicle import framework. Industry insiders suggest that without robust oversight and timely policy corrections, such loopholes tend to attract bad-faith actors who game valuation mechanisms at the expense of both legitimate businesses and the national treasury.

As the government prepares its economic roadmap for the coming year, the CMTA's appeal adds a compelling, industry-backed voice to calls for tighter revenue administration and more rigorous customs enforcement in the automotive sector.