Stupid excuse for not to reduce the car import tax!

Government reduces car import taxes

March 1, 2013

Farah Adilla

PUTRAJAYA: The government announced yesterday reductions on import taxes on vehicles from Japan and Australia and that it is talking with local industry players on the possibility of cutting the moresubstantial excise duties on auto imports.

International Trade and Industry Minister Mustapa Mohamed said any reduction in excise duties will not be anytime soon due to the implications of such a move to the local auto industry and the welfare of its 300,000 workers.

“The contribution of excise duties to the economy is huge. The government is monitoring the issue closely but we are not planning for the cut anytime soon.

“The work is in progress,” he told a press conference here yesterday. A cut in excise duties on imports, which ranges from 30% to 100%, had been widely anticipated when the ministry said it was making an announcement on car price reductions.

This prospect re-opened the debate over the implications, including its impact on the value of second hand cars. Analysts said if the price of new cars drop significantly because of the tariff cut, the price difference between new and used cars at current prices will narrow to a point where the consumer will opt for the new purchase.

Analysts said any reduction in excise duties should be implemented gradually to lessen the impact on the used car market.

“The government has been mulling this idea of reduction in excise duties for some time, but I feel that the reduction should not be too drastic as it will negatively impact the second hand car market,” an analyst with a local stockbroking company told The Malaysian Reserve.

Mustapa announced yesterday that import duties have been reduced from 30% to 15% for Japanese cars and to 13.6% for Australian cars and will be phased out to zero in three years.

He said the price of imports will be further reduced when the auto industry is liberalised under various free trade agreements (FTAs) that will come into force in 2016.

“The reduction in car prices is also a result of measures taken by the government to make the industry more efficient and competitive,” added Mustapa.

Under the Asean Free Trade Agreement, import duties on cars orignating from within the Asean membership have been eliminated from Jan 1, 2010. Mustapa said the government is currently in talks with the European Union, Turkey and Bangladesh to sign the bilateral FTAs.

Meanwhile, national carmaker Proton Holdings Bhd said the company welcomes the government’s decision to gradually introduce new policies that would reduce the prices of cars in the country.

“As this involves the entire ecochain of the industry, Proton will further study all aspects relating thereto and possible impact it has on not only the company but the entire local automotive industry.

“Any decision on this will be made after due discussions and consideration with all our stakeholders, which include our vendors, suppliers, dealers, pre-owned vehicle operators and the consumers,” the company said in a statement yesterday.