The ministry of international trade and industry (MITI) says it is looking at a reduction in vehicle excise duties as a possible means to bring car prices down. Such a move will mean less direct revenue for the government, but this will be offset by improved tax collection from an increased sales volume, according to deputy minister of international trade and industry Ong Kian Ming.

He said that on the whole, it would benefit consumers, industry players as well as the government, as The Star reports. “Of course, there is a cost-benefit involved here, in the sense that you have more tax reduction in the excise duty. The government may collect less per unit, but whatever revenue lost by the finance ministry can be regained by the increase in the sales volume because car prices would be lower,” he said.

“The original equipment manufacturers (OEMs) get to sell more cars, consumers get to benefit from lower car prices and the finance ministry gets to benefit as well, when it gets to collect more excise tax as a whole because of increased volumes. This is something we want to work towards for all car models,” he explained.

Ong said that industry players will be providing the government with their estimates on an expected increase in sales volume as a result of excise duty being reduced. He added that local parts suppliers and OEM vendors will also benefit from the move through an increase in completely-knocked-down (CKD) activities.

Industry observers and analysts offered different views on the proposed move. An industry observer said that it would help lower car prices and benefit local automakers more than those that imported vehicles, as this would help CKD programmes in the country.

An analyst had a different take on the matter, saying that an excise duty reduction will not have an impact on sales volumes or improve the government’s coffers, adding that even if it did, it might hardly be felt. “The prices of Perodua and Proton vehicles might not reduce that much from this, but it will be more favourable for Japanese brands,” he said.

What do you think of the plan to reduce automotive excise duties? Share your thoughts in the comments section, but do remember to keep it civil.