apalancho!: 3 Darn Good Reasons to Remove Excise Tax on Malaysian Vehicles

A dated reader's comment on The Star caught my attention in tune with the impending fuel hike in Malaysia.

Don’t subsidise fuel, don’t tax cars

I AGREE with Dzof Azmi's argument in Fueling Trouble with Petrol Subsidies, (Contradictheory, StarMag, March 30) that the Government cannot afford to subsidise petrol and keep prices artificially low forever.

However, I want to point out that when you talk about the price of petrol, you have to also talk about the price of cars in Malaysia. These two items go hand in hand, something that Dzof failed to mention.

If one expects the rakyat to pay the real price of petrol (say, RM3 per litre) in the future when the petrol subsidy is zero, then the price of cars must also be real, ie, be tax free.

If one expects the people to pay the full, real-world price of petrol – and I must say it is a perfectly reasonable expectation – then the rakyat expects, also reasonably, to buy cars at real-world prices, without the exorbitant taxes currently imposed.

For example, a Toyota Corolla at the real price of US$19,000 (RM60,500) instead of artificially high at RM117,000.

Now, when the average consumer buys a car, he has already paid (in the form of import duties, excise duties, and sales tax) to the Government, in advance, a sum greater than the petrol subsidy he can expect to enjoy over the time he owns the car.

Let me give you an example.

If a consumer buys a Toyota Corolla at RM117,000, the tax he pays, up front, to the Government is more than RM50,000.

Then, he enjoys the fuel subsidy each time he fills up with petrol. To benefit from the RM50,000 that he has paid, in advance, it will take approximately 16 years (assuming he uses 60 litres of petrol a week and the subsidy is RM1 per litre)!

So, it is not fair to say that the subsidy of petrol has to be reduced or removed when the commodity price goes up, without reducing or abolishing the hefty taxes on cars.

You can’t use the “cheapest petrol in South-East Asia” and “price of crude oil has skyrocketed” excuses to justify the reduction in petrol subsidy as long as the ridiculously high tax is imposed on cars.

The rakyat won’t buy your story because we know that we, as motorists, have already paid for the petrol “subsidy”. In advance.

Jimmy Wah, Bayan Lepas, Penang

In my opinion what Jimmy Wah mentioned in The Star on April 6,2008 is very true. Adding salt to the wound, below I have attached the prices of vehicles in Malaysia before application of excise tax which I believe have been circulating the internet for a while now.

Malaysian Vehicles Pre-Tax Prices - Upload a doc

If you want to lift the subsidies for fuel, then lift the excise tax on vehicles. This is Reason #1 Justified.

The government has all this while taken a big fat cut from the price of vehicles via excise tax. Reason being? To protect Proton and give it leverage as the local car manufacturer. This excuse has been used for more than 20 years now. Proton has since matured and grown tremendously. We can see significant improvements to designs and features in its models. Proton can no longer be a valid reason for the existence of excise tax. Reason #2 Justified.

Remember the voluntary vehicle scrap policy? RM5000 for your 15 year old piece of junk? Well my 16-year-old junk of a Toyota is running perfectly and will fetch approximately RM10,000! If the government seriously wants to implement this policy, they should at least reduce, if not eliminate the excise tax. Yes yes they are trying to emulate countries like Japan but don't forget, cars there are priced much cheaper. Cars in Japan exceeding 5-years will experience a severe price drop if not de-commissioned. That is the exact reason why most of the luxurious and sporty Japanese cars you see in MotorTrader are at least 5 years old. Now if Malaysia were to implement the voluntary vehicle scrap policy, shouldn't they remove the excise tax on vehicles as well? Reason #3 Justified.