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Thursday, April 17, 2008

Remove fuel subsidy. Yes! But remove duties & taxes 1st...

Firstly, I'd like to mention that the Government cannot afford to subsidise petrol and keep prices artificially low forever.

However, I want to point out that when you talk about the price of petrol, you have to also talk about the price of cars in Malaysia. These two items goes hand in hand.

If one expects we Malaysians to pay the real price of petrol (say, RM3.00 per litre) in the future when the petrol subsidy is zero, then the price of cars must also be real, ie, duty and tax free.

If one expects the people to pay the full, real-world price of petrol – and I must say it is a perfectly reasonable expectation – then we Malaysians expects, also reasonably, to buy cars at real-world prices, without the exorbitant taxes currently imposed.

For example, a Honda Civic at the real price is about RM65,000 (as in Labuan). Instead, it's priced artificially high at RM112,000 in rest of Malaysia.

Now, when the average consumer buys a car, he has already paid (in the form of import duties, excise duties, and sales tax) to the Government, IN ADVANCE, a sum GREATER THAN THE PETROL SUBSIDY he can expect to enjoy over the time he owns the car.

Let me give you a scenario:

If a consumer buys a Honda Civic at RM112,000, the duties and tax he pays, up front, to the Government is more than RM50,000.

Then, he enjoys the fuel subsidy each time he fills up with petrol. To benefit from the RM50,000 that he has paid, in advance, it will take approximately 16 years (assuming he uses 60 litres of petrol a week and the subsidy is RM1 per litre)!
So, it is not fair to say that the subsidy of petrol has to be reduced or removed when the commodity price goes up, without reducing or abolishing the hefty taxes on cars.

You can’t use the “cheapest petrol in South-East Asia” and “price of crude oil has skyrocketed” excuses to justify the reduction in petrol subsidy as long as the ridiculously high tax is imposed on cars.

Any Malaysian won’t buy your story because we know that we, as motorists, have already paid for the petrol “subsidy”. In advance.

My conclusion: BOTH the Fuel subsidy AND "Import Duty, Excise Duty, Sales tax and ALL sort of other Vehicle taxes" MUST GO. As seen in The UK, where the petrol price's sky high BUT the car prices there are one of the cheapest in the world. If UK can, so can Malaysia.

Ironically, the British average monthly income's GBP3,000 but their average 1.6cc mid-size car's only GBP13,000 (Toyota Corolla 1.6) whereas we Malaysians earned an average of RM1,800 (GBP280!) but our Corolla Altis 1.6 were priced at 110,000 (GBP17,000), thanks to the Excise Duties, import duties and sales tax.

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