Tax EVs as luxury goods, says economist

 

Economist Geoffrey Williams said electric vehicles are normally owned by the richer families, who often have them as a second or third car. (Tesla pic)

PETALING JAYA: Purchases of private electric vehicles (EV) should be taxed rather than benefit from tax breaks, an economist said.

Geoffrey Williams of the Malaysia University of Science and Technology said private EVs should be classified as luxury goods since they are expensive to buy and maintain, meaning only the richer families in the country can afford them.

He said, as a result, tax incentives offered for the purchase of EVs will not necessarily provide any substantive social benefit for the masses.

Geoffrey Williams.

“EVs are luxury goods in the same way as any other form of luxury goods. Often, they are second or even third cars for a family that have other types of petrol or diesel vehicles,” Williams told FMT.

According to a Bernama report, the government is targeting 1.5 million EVs on Malaysian roads by 2040, well up from a target of 90,000 units set previously.

Natural resources, environment and climate change minister Nik Nazmi Nik Ahmad was quoted as saying the new target was to keep Malaysia in line with a fast-growing shift away from internal combustion engine vehicles to EVs on a global level.

During the 2023 budget, the finance ministry announced an excise duty and sales tax exemption for locally assembled EVs until Dec 31, 2027.

Meanwhile, the ministry also announced that the import and excise duty exemption for imported EVs is extended to Dec 31, 2025.

EVs are also presently exempt from road tax until end-2025.

In the recently tabled Budget 2024, Prime Minister Anwar Ibrahim announced a scheme that would encourage those earning up to RM120,000 annually to buy electric motorcycles.

He said the scheme is expected to provide buyers rebates of up to RM2,500.

Yeah Kim Leng.

Yeah Kim Leng of Sunway University said the tax exemptions for EVs are part of a government initiative under the national energy transition roadmap to shift to a green economy with net-zero carbon emissions.

He said the tax breaks are intended to accelerate the transition process, enhancing EV investment in the country and attracting foreign direct investment for the industry’s entire supply chain, including the manufacture of batteries.

“Taxing it (EVs) would counter the (country’s) long-term aspiration of shifting to green energy, promoting electrification and reducing our carbon footprint,” said Yeah. - FMT