Putrajaya told to cut excise tax if serious about cheaper cars

KUALA LUMPUR, Feb 28 – Putrajaya should cut excise tax for all foreign cars shipped into the country instead of doing away with the import duty for high-end makes that only the rich can afford, PKR’s Rafizi Ramli said today.

“If Umno/Barisan Nasional is also concerned about the people’s fate, it should reduce the excise duty, not make a shadow play like now,” the PKR strategy director said in an immediate statement following the federal government’s announcement this morning.

He also said the 13.6 per cent import tax cut for cars in the 2,500-3,000cc fuel capacity range would only affect 21,000 units a year, noting that a large proportion of the foreign cars favoured by Malaysians were completely built in Japan, which formed around 3.5 per cent of the total industry volume.

“The total number of cars imported from Australia is too small and will completely not impact the car price in that country,” Rafizi said.

An excise tax is an extra charge imposed by a government on use or consumption of certain products, such as gambling, motor fuels, cigarettes and alcohol. It is conventionally levied to protect the domestic market or to discourage people from buying certain goods.

The opposition politician said his party maintained its stand that the excise tax needed to be restructured if cars were to be cheaper.

He noted that excise tax, coupled with the sales tax, that starts from 85 per cent for a 1,800cc car and exceeded 115 per cent for the high-end makes of 3,000cc are imposed on all cars regardless of where they were built.

“It is this tax that is choking the people, especially the lower-income classes that buy locally-made cars,” he said.

He added that for this income group, they were “forced” to fork out to double the original car price because of the excise tax.

“More importantly, the excise tax is fully within the control of the federal government without having to negotiate with any country,” he said.

Rafizi repeated his party’s promise under the recently-launched Pakatan Rakyat (PR) election manifesto to reduce the excise tax by 20 per cent in stages over a five-year period.

He said that by 2018, there would be no more excise tax on foreign-made cars on the road here if PR were voted into Putrajaya.

PR in its manifesto has promised to liberalise the national automotive industry to increase its competitiveness, leading to a national car priced as low as RM25,000.

Currently, Perodua Viva starts at RM24,912 for its 660 BX variant, while a Proton Saga FLX starts at RM38,361 for its standard variant with manual transmission.

The initiative to lower car prices is the government’s way to help the youths who are struggling financially in urban areas, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said earlier today.

“We understand that cars is a necessity for youths in Kuala Lumpur ... We sympathise with them,” he said.

He however insisted that in long term, the more sustainable solution should be to improve Malaysia’s public transport instead of making it easy for citizens to purchase cars.

“The long term solution is not to keep on encouraging people to drive a car to work ... It’s not environmentally friendly,” Mustapa said.

The minister declined to comment when asked about the possibility of reducing traffic congestion in urban areas when cars can be available for cheaper prices.

The Malaysian Insider understands that under the Malaysia-Australia Free Trade Agreement (FTA) which came into effect on January 1, Putrajaya has committed to cut duties from 15 per cent in 2013 to 10 per cent in 2014 and 5 per cent in 2015 with zero duties in 2016.

Malaysia is also a signatory to the Asean Free Trade Area (AFTA) agreement, which will liberalise the automotive industry by the end of 2015 through the removal of taxes on vehicles with at least 40 per cent Asean regional value content.