The Microeconomic Impact of Fuel Price and Tax Increases on Professionals’ Transport Mode Choices in Sri Lanka

Sri Lanka's recent economic crisis, marked by steep fuel price increases and higher income taxation, has eroded disposable incomes and significantly increased commuting costs. Professionals (ISCO-88) represent a critical commuter group in Colombo due to their high value of time and reliance on private transport; however, limited empirical research examines how simultaneous fuel price and income tax shocks influence their mode choices. This study investigates the microeconomic impact of these shocks on mode choice using a stated-preference experiment with 42 respondents across five scenarios reflecting variations in fuel prices, commuting distances, and taxation-induced income reductions. Alternative-specific travel costs and times were derived using calibrated functions to ensure realistic trade-offs among cars, motorcycles, staff transport, and public transport, and responses were analysed using an alternative-specific conditional logit model. The results indicate a clear substitution pattern under increasing cost pressures: motorcycle usage declines sharply with income reductions, car use decreases more gradually, staff transport acts as an intermediate adjustment mechanism, and public transport absorbs the largest share of demand. These responses reflect short-run adjustments to cost shocks driven by changes in relative generalised costs rather than permanent preference shifts. The findings highlight how combined fuel price and income tax shocks reshape commuting behaviour in the short run, emphasising the need to align fuel taxation with investments in public and employer-supported transport to ensure sustainable urban mobility.