The government is likely to reduce the prohibitive taxes on small cars and offer greater incentives for electric vehicles in the first budget to be unveiled by minister Mangala Samaraweera in November.
Minister Samaraweera has already promised a “leaner, greener” budget ahead of possible local council elections that could be held as early as January or at least before the end of the first quarter of 2018.
Former finance minister Ravi Karunanayake had jacked up taxes on vehicles across the board in his 2016 budget as the country faced a serious balance of payments crisis on a mistaken notion that imports, rather than money printing by the Central Bank, caused the crisis.
Following a successful IMF bailout and monetary policy measures to stem the flow of foreign exchange out of the country, policy makers have been considering a more pragmatic tax structure for vehicles.
Officials noted that the volume of government revenue increased when the new administration shortly after coming to power in January 2015 sharply lowered customs duties on cars as well as other vehicles at a time when imports had just started to pick up.