Malaysia Budget 2022 suggestions: what to ask for – more SST relief, lower car tax, cheaper EVs and tolls?

It’s that time of year again when the government prepares to table a new annual budget, and if you have some ideas of what should be included, you can submit your proposals for the Malaysian Budget 2022 at the ministry of finance’s official website.

Now, there’s no guarantee that what we, the rakyat, suggest will be included in Budget 2022, so here’s to hoping a collective voice still holds some weight in deciding federal matters. Since we’ll have wait for Budget 2022 to be tabled to find out what the government decides upon, here are some plausible implementations that we can think of.

As a side note, if you want a recap of what was included in last year’s Budget 2021, we’ve compiled all relevant automotive- and transport-related points in a much earlier post. We’ve been covering these announcements for over a decade now, so refer to those posts if you would like to know more.

A further extension of the SST exemption period for cars?

When the first movement control order was implemented last year, new car sales took a big hit as dealerships were forced to close. In an effort to spur demand in the automotive sector, the government introduced the Penjana economic stimulus plan that granted a 100% sales tax exemption on locally-assembled (CKD) models and 50% on fully-imported (CBU) models.

Initially effective from June 15 until December 31, 2020, the sales tax relief would later be extended to June 30, 2021, and again to December 31, 2021 under the Pemerkasa+ plan. However, even though consumers benefitted from reduced car prices, car companies still found it a challenge to fulfil existing and incoming orders.

This was because of the different lockdowns put in place mere months ago, which resulted in car factories and showrooms being closed. Further compounding the problem are disrupted supply chains, which is only made worse by ongoing global chip shortage.

In July, the Malaysian Automotive Association (MAA) asked the government for another extension to the sales tax exemption in order to “make up for lost time,” so to speak. This will certainly benefit a lot of car buyers, some of whom are still waiting for their new ride and hoping it is registered before the current Penjana sales tax relief end date.

Do you think this discounting (at the expense of tax collection) has gone on long enough, or should it be extended further?

Less fuel subsidy, but lower car tax?

A lot of Malaysians have been calling for cheaper cars, and one way to achieve that is by reducing the tax on them. It sounds simple enough, but this isn’t something that can be implemented hastily, as the government will have to recoup the losses from reduced car taxes elsewhere.

One idea that has been mooted before is to remove fuel subsidies, which could offset the revenue the government losses if it reduces car taxes. With this, motorists will be paying market price for fuel, but those looking for new cars will get to buy them at cheaper prices. Technically, Malaysians will be paying the real “market price” for both new cars and fuel, rather than artificially inflated (with taxes) or subsidised rates.

An argument against this approach is that this will only benefit those with spending power, i.e., those who can afford to buy new cars, while being a negative for everyone else. If you already own a car and don’t plan to buy a new one anytime soon, you’ll still be forced to pay higher fuel prices with little to no benefit to you.

A small advantage is that cheaper car prices could make it easier for car buyers to upgrade to models that offer better fuel consumption than what they currently own. Of course, high fuel prices can affect a lot more than what you pay at the pumps, as we’ve seen in the past that the effects extend to everything from the price of your teh tarik to essential goods, all on the ground of “higher costs” relating to transportation.

Again, it sounds simple enough, but this can be a very slippery slope to take, with major consequences either way. With that in mind, should we keep things status quo, or make the jump? What do you think?

Cheaper tolls, introduce congestion charge?

Another sensitive subject. While we are not going to touch on the various political promises that have been made, toll prices remain one of the biggest talking points among Malaysian motorists, with plenty of opinions thrown around.

One suggestion that has been put forward in the past was to introduce a congestion charge system. With this, the amount you pay at tolls would vary depending on the time of day, i.e., higher during peak hours, but cheaper rates or even free during off-peak periods.

Over the years, we’ve also heard calls for tolls to be abolished completely, but whether that’s actually achievable is another matter. It has happened before in certain locations, but with active contracts involving concessionaries, it’s no easy feat and we’ve been told it’s an incredibly costly endeavour.

Incentives for electric vehicles (EVs) and better charging infrastructure

In the past few months, we’ve seen car companies announce their commitment to introduce EVs in neighbouring countries, but Malaysia appears to be lagging behind. In countries like Thailand and Indonesia, the local governments there are actively luring car companies to set up an EV hub, and incentives play a major role in this initiative.

By comparison, Malaysia’s EV policy is still a work in progress and we’ve yet to get anything conclusive; it was originally supposed to be announced in Q1 this year. Back in May, Malaysia Automotive, Robotics and IoT Institute (MARii) CEO Datuk Madani Sahari said the upcoming policy is in the final approval by the government and that a “handsome level” of tax incentives will be offered to car companies.

Of course, a market packed with EVs must also be supported by better charging infrastructure, which is still somewhat limited here. ChargEV, which is one of the leading EV charging network operators here, currently has 326 charging stations available in 223 locations in Malaysia, most of them located in the central region.

Again, both specialised incentives for EVs and additional charging infrastructure will incur considerable costs to the government. Whether this is a price worth paying for now, is up to your own opinion.

On one hand, there’s an argument to be made that EVs are currently toys among the rich and privileged, and that any movement in this department (and the considerable costs involved) will only benefit them, and not the rakyat marhean, so to speak. On the flipside, we also risk being left behind if things stay the same.

This is another instance of a chicken and egg situation: some say that EVs are not viable until a comprehensive charging infrastructure is established, yet is there a real need to set one up if there are no affordable EVs that you and I can buy in the first place?

An easy solution (to say, not implement) would be to cover both grounds: offer generous incentives to make EVs affordable, and at the same time build up the charging infrastructure to support them. The thing is, is this something the government should tackle in the here and now? Do discuss below.

A clearer National Automotive Policy (NAP)

In February last year, the National Automotive Policy 2020 (NAP 2020) was launched and was aimed at developing the country towards becoming a regional leader in automotive manufacturing, engineering and technology, enhancing on the previous NAP 2014.

While the roadmap covered things like Next Generation Vehicles (NxGVs), Mobility as a Service (MaaS) and Industry 4.0, it doesn’t make it easy for regular folk who just want to know if car prices will go down as a result of it.

Later in July, it was revealed that NAP 2020 would be restructured to ensure the country’s automotive sector remains competitive following the Covid-19 pandemic, but any updates have yet to be formally announced.

At the time, minister of international trade and industry Datuk Seri Azmin Ali said the exercise will see the government intensify its efforts to attract more investments in high-technology segments and environmentally-friendly vehicles as well as in the development of a local skilled-workforce. As mentioned with EVs, incentives are one way to lure in would-be investors, so it is something that should be clearer explained in the NAP.

A new road tax system?

For the longest time here, a vehicle’s road tax in Malaysia is calculated based on engine capacity, but this can be considered a rather archaic system and in no way reflects a car’s fuel consumption and carbon emissions.

While this may have made sense at some point in time, the recent trend of engine downsizing and electrification has made a mockery of this system. For instance, a premium car with a modern turbo engine will have a cheaper road tax compared to a much smaller, budget vehicle running a larger naturally-aspirated engine. Let’s not even start on the different rates applied to SUVs and vehicles registered in Sabah and Sarawak.

If the government wants to promote the uptake of cars that are more environmentally-friendly, rewarding those who purchase such cars with lesser road tax seems fair. In Europe, road tax is based on a vehicle’s CO2 emission level, so the lower it is, the less an owner pays.

So, what would be your ideal road tax system? Should we stick to the current displacement-based structure, or move to something that is more relevant such as emissions, weight, age, usage or perhaps any combination of those. Do give your suggestions below.

Anything else auto-related you want to ask for?

Besides these suggestions, are there anything else that you want to ask for? Better public transport, or perhaps even a move towards having EV taxis to help shift public opinion on the matter (Singapore has just started this), maybe?

However, do bear in mind that the country is not exactly in the best of health (literally and financially) at the moment, and there may be other pressing issues that should be taken care of first before making any changes above. After all, what some people want may not be what everyone needs right now.

That said, since there is an opening for any of us to offer suggestions, do ask away. In the meantime, do let us know what you think of our suggestions and share your own in the comments section below.

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Learn more: Malaysia Budget 2022