The government’s stance on excise duties were made clear today at the National Automotive Policy (NAP 2014) announcement – its current fiscal position benefits from the revenue obtained from charging excise duties, so excise duties are to stay.
However, MITI minister Datuk Seri Mustapa Mohamed said that the government is constantly reviewing its fiscal position and is open to the possibility of reducing excise duties when the fiscal situation permits it.
Excise duties currently stand at about 65% to 105%, however many car manufacturers pay much less than that thanks to the various mechanisms in place in exchange for car localisation. According to Mustapa, the average excise duty being paid per car is about 50%.
“I’m just sharing with you why it is not possible for us now, under present circumstances, to consider reviewing some of these taxes. Last year, we were estimated to have collected RM480 million in the form of import taxes, because as I said, from ASEAN was (subject to) zero percent, while from many countries taxes are low, and hybrid is also zero tax, therefore taxes we collected in the form of import duty are small.”
“The auto sector is a very important contributor to the government’s coffers – 75% of the duties collected from the auto sector comes from excise duties,” he said.
“On excise duties, the position of the government is as follows. Given the current situation of the budget, it is not possible for the government to review excise duties, but the government, of course, in the next few years, will review the fiscal situation. And as the fiscal situation improves, the government will consider looking into the possibility of gradually reducing excise duties.”
“At this present moment, it is not possible for the government to consider any reduction in excise duties. Going forward, the government will be monitoring the fiscal situation, and in the event the fiscal situation is conducive, the government is open to the possibility of gradually reviewing excise duties. As you know, excise duty is now between 65% and 105%, although many car companies, through various policies, pay a lot less than that. We estimate that car companies pay about 50% on average,” Mustapa stated.
“If the financial situation improves, the government is open to the possibility of reducing excise duties gradually over a period of time. This is an answer to many proposals coming from the public and parliament especially in the run up to GE13. I hope this will put a closure to this contentious subject,” he concluded.
Excise duties provided the government with revenue of about RM7,308 million in 2013. In addition, RM480 million was collected in the form of import tax and RM2,039 million in the form of 10% sales tax.