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UMNO youth chief Khairy Jamaluddin has proposed a First Car scheme, where young people earning under RM4,000 a month could buy their first car without paying tax on it, according to reports by Sinar Harian and The Star.

“(Translated) Many young people run into difficulties servicing vehicle loans, which are the second-highest behind property loans. Through a First Car scheme, youth earning under RM4,000 a month could buy their first car without paying tax or excise duties.

“This will reduce car prices especially for youth buying for the first time. The cars included in such a scheme should be moderately-priced and locally-assembled,” Sinar Harian quoted him as saying.

A few years ago, Thailand launched a first-car scheme, under which the buyer had to be at least 21 years of age and own the car for at least five years. The car had to be completely built in Thailand and not be worth over one million baht (RM102k).

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Also, its engine could not displace more than 1.5 litres, and the purchase had to take place between September 16, 2011 and December 31, 2012. Once these conditions were met, the buyer was eligible for tax refunds with a ceiling of 100,000 baht (RM10,200) per unit.

The scheme didn’t quite work as intended, leaving more than 100,000 indebted customers defaulting, Reuters reported. The tax breaks cost the government US$2.5 billion (RM8.37 billion), according to World Bank estimates.

Will a First Car scheme work for Malaysia? Let us know what you think in the comments section.