Sri Lanka Customs has initiated a thorough investigation into all Electric Vehicle (EV) permits issued to migrant workers with foreign currency remittance accounts in the Sri Lankan banking system, The Sunday Morning reliably learns.
It is learnt that the decision to launch the investigation comes on the heels of the discovery of numerous discrepancies within the EV permit scheme.
The Sunday Morning learns that Sri Lanka Customs has commenced a comprehensive review to determine whether these permits have been rightfully allocated to individuals who actually remitted foreign currency earned through foreign employment.
Of particular concern is the possibility that permits may have been granted indiscriminately, without verifying whether the remitted funds originated from legitimate foreign employment or other sources, it is learnt.
As previously reported by The Sunday Morning, Sri Lanka Customs has discovered that a total of 119 luxury vehicles have been imported into the country under the false pretence of being EVs. These vehicles include 22 BMWs, 13 Mercedes Benzes, five Porsches, six Ford Mustangs, six Audis, four Teslas, 22 Volkswagens, eight Peugeots, 18 MGs, 10 Nissans, one Hyundai, three Netas, and one Tata.
Notably, a company named Overland Automobiles Ltd. had imported a significant portion of these vehicles, accounting for 75 out of the 119 luxury vehicles. Sri Lanka Customs reports that the total Cost, Insurance, and Freight (CIF) value of these imported vehicles amounts to Rs. 1,992.2 million. Additionally, taxes collected through migrant worker permits total Rs. 1,060 million.
However, Customs calculations reveal that Sri Lanka could have collected a substantial Rs. 1,413.8 million in taxes if these vehicles had not exploited permits intended for the migrant labour force. Consequently, the country has suffered a significant tax loss amounting to Rs. 353.72 million due to this misuse.
Investigation underway
Speaking to The Sunday Morning, Customs Senior Director and Spokesman Seevali Arukgoda disclosed significant irregularities uncovered by Sri Lanka Customs. Arukgoda confirmed that a thorough investigation had been initiated into the matter.
“Investigators are currently scrutinising whether the permits issued by the ministry were indeed allocated to migrant workers who genuinely remitted foreign currency. Ideally, these critical aspects should have been addressed prior to the launch of the programme. Customs is meticulously examining whether the permits have been granted to deserving individuals who met all the criteria outlined in the issued circular. I am unable to provide any further details regarding the investigation until its conclusion,” he said.
In a bid to boost the nation’s foreign currency reserves and combat illicit market activities, the Government introduced a strategy to incentivise expatriates to channel their funds through legitimate avenues and Minister of Labour and Foreign Employment Manusha Nanayakkara obtained Cabinet approval in October 2022 for the innovative scheme.
Under this initiative, expatriates who have transferred more than $ 3,000 are eligible to import a solar-powered electric motorcycle valued at $ 25,000 or less. Those who have remitted more than $ 20,000 are granted the opportunity to import an electric car, with its price capped at half of the remitted amount, up to a maximum of $ 65,000.
The primary aim of this scheme is to incentivise remittances through legal channels, thereby ensuring a consistent inflow of foreign exchange into the nation’s economy. Notably, the initial requirement for EVs to be solar-powered was later rescinded.
According to Circular No.2/2022 issued by the Ministry of Labour and Foreign Employment, a scheme has been established for granting permits and licences to import fully electric vehicles for Sri Lankans employed abroad. To qualify for this benefit, at least 50% of the foreign currency remitted by the Sri Lankan employed abroad must be converted into Sri Lankan Rupees through the country’s banking system.
These provisions are effective for a specified period detailed in the circular. The foreign exchange remitted must be utilised for all expenses related to vehicle importation, including applicable Government taxes. If the scheme extends beyond the specified period, a Sri Lankan employed abroad may import a vehicle once every five years from the issuance of the first permit. Additionally, permission is granted to transfer the vehicle to a third party two years after registration.
The restrictions for vehicle permits are included for electrically-powered two-wheel vehicles (motor bicycle, HS Code 8711); if 3,000 or more are imported, the remitted foreign exchange must not exceed 50% of the amount from 1 May 2022 to 30 April 2023, with a maximum CIF value of $ 25,000.
For electrically-powered vehicles with four wheels (motor car, HS Code 8703; commercial vehicle HS Code 8704), if 20,000 or more are imported, the remitted foreign exchange must not exceed 50% of the amount from 1 May 2022 to 31 December 2022, with a maximum CIF value of $ 65,000.
Any individual found submitting forged documents or false information to obtain a vehicle permit under this scheme will face legal action under Sri Lankan laws and such individuals will be disqualified from receiving any Government or Sri Lanka Bureau of Foreign Employment (SLBFE) benefits for a period of 10 years.
Application forms for importing electric vehicles under this scheme can be obtained from the Ministry of Labour and Foreign Employment website or the SLBFE website. Completed applications, along with all relevant documents, should be submitted to the Ministry of Labour and Foreign Employment. The relevant bank must furnish a confirmation letter detailing the total annual remittances, the amount of foreign currency converted to rupees, and the foreign currency savings.
Subsequently, the ministry will issue the vehicle import permit, valid for six months, upon submission of the completed application and required documents. The authentication of any submitted documents lies with the Ministry of Labour and Foreign Employment.
Permits and transfers
Labour and Foreign Employment Ministry Secretary R.P.A. Wimalaweera told The Sunday Morning that permits had been issued to all individuals who had opened foreign remittance accounts in Sri Lanka’s banking system and issuance occurred upon certification by the bank.
Responding to inquiries about potential irregularities or misuse of permits, the Secretary said: “My responsibility is to issue permits. Sri Lanka Customs or other relevant authorities should investigate any irregularities. The primary objective of the programme was to incentivise foreign remittances and it has been successful.”
When pressed further on whether permit holders had been permitted to transfer their permits, Wimalaweera acknowledged the provision approved by the Cabinet, allowing permit transfer. However, he noted: “Permit holders must retain the vehicle for two years. Afterwards, I believe they are permitted to transfer it, subject to paying a certain tax to the Government.”
In the wake of a temporary ban on vehicle imports imposed in March 2020, as a response to depleted foreign reserves and the economic repercussions of the Easter Sunday terror attacks and the Covid-19 pandemic, the specially-introduced import licence scheme tailored for migrant workers had facilitated the import of nearly 200 EVs, as per the latest available statistics.
Notably, Sri Lanka’s expenditure on vehicle imports in 2019 amounted to approximately $ 815.7 million. However, by August 2021, the Central Bank of Sri Lanka (CBSL) reported an astonishing 80.9% contraction in motor vehicle import expenditure, attributed to the import restrictions imposed since March 2020.