Sri Lanka's treasury secretary has given the green light to grant tax cuts up to 50 percent of vehicle import prices to senior state sector workers after nearly halving tariffs on motor vehicles a few months ago, a finance ministry circular showed.

The proposed tax cut to be effective form December 15, 2010, is open to state sector officials who have served at a senior position for over six years.

Officers above the ranks of lieutenant colonel, commander and wing commander is entitled to the tax concession, while professionals attached to the armed forces such as engineers, lawyers, doctors and accountants are also eligible, the finance ministry circular showed.

Senior university academics with 12 years services are also eligible to the permit.

The tax cut is only valid to import brand new vehicles, but vehicles that have been used for less than one year abroad and locally assembled vehicles using brand new parts is also eligible.

Vehicles are given a maximum importation value of 25,000 US dollars.

Under the tax cut vehicles with an engine capacity less than 1,000 CC (cubic capacity) will get a 50 percent tax cut, while vehicles above 1,000CC, but under 1,600 CC is entitled to a 45 percent reduction.

Vehicles under 2,000 CC, but over 1,600 CC will get a 40 percent reduction, while vehicles above 2,000 CC, but less than 2,600 CC is entitled to 30 percent reduction on import taxes.

The tax cut is equal to both petrol and diesel powered engines.

Sri Lanka's overstaffed state sector serves almost 17 citizens per public servant, the highest in the world.

Until recently ordinary Sri Lankan's were paying vehicles import taxes over 300 percent, while public servants and representatives were given permits to import vehicles tax free.

The government changed its policy three months ago under instructions by International Monetary Fund (IMF) to receive an emergency bailout package after facing a near balance of payments crisis after depleting national reserves defending the rupee.