COLOMBO, Feb 18: Sri Lanka has further raised taxes on cars to discourage imports and save foreign exchange, officials said on Monday, pushing first-time buyers out of the market as economic woes worsen on the island.

The new tax, which adds 10 per cent import duty on cars and vans, is to be rubber-stamped by parliament this month although customs authorities have been collecting it since January.

Ambulances, funeral hearses, buses and three-wheel vehicles are exempt from the higher tax.

“The additional revenue will go into a fund to develop regional infrastructure facilities,” assistant director of customs, K. Premanath, told AFP.

Sri Lanka has no car manufacturing industry and imports mainly from Asia and Europe with duties ranging from 250 to 350 per cent before the new tax.

The finance ministry said the hike is also to discourage imports and save foreign exchange.

The island’s overall imports jumped 10.2 per cent in 2007 to $11.30 billion, the central bank said last week. Petroleum products accounted for nearly 60 per cent of import costs. Total vehicle registrations in 2007 was flat at 278,000, according to customs figures.

“We have seen a 25 to 30 per cent drop in overall vehicle sales in the past year alone. The taxes makes it impossible for first time buyers to own a vehicle,” said Ranjan de Silva of the Motor Traders Association.—AFP