Pakatan's auto tax plan just a fantasy

IT is not hard to dismiss the latest populist election promise by the opposition, which not unlike their previous promises, will only cause further strain on the country's finances.

Pakatan Rakyat's series of populist measures are not only poorly thought-out but financially imprudent as well. A full adherence to their policies (cheaper petrol, more subsidies and other freebies) will cause the Treasury to run out of money in no time.

For some weird reasons, the opposition is so obsessed with cars or anything to do with cars.

Their latest promise is to reduce car prices by slashing excise and other duties if they ever win power. Just before this, their No. 1 leader promised to drop fuel prices within 24 hours of PR taking federal power, as well as to do away with road tolls.

Reducing car duties may sound simple and easy. But the implications can be great.

Firstly, Malaysians could face a much higher tax burden in order to offset the loss in revenue from auto excise duties. Secondly, the rich and not the poor will benefit the most because car prices would no longer be exorbitant.

Currently, car buyers pay between 75 and 105 per cent in excise duties. This is on top of import duties (for imported cars) and sales tax.

Excise duties are duties levied on selected products manufactured in Malaysia, namely cigarettes, tobacco products, alcoholic beverages, playing cards, mahjong tiles and motor vehicles.

The government collects about RM7 billion a year in vehicle excise duty. This amount will go a long way in paying for our schools, hospitals and other public amenities.

Parti Keadilan Rakyat chief strategist Rafizi Ramli had announced on Tuesday that PR would revamp the National Automotive Policy, including slashing excise duties and reducing the taxes on cars, if it ever wins power.

But he never explained how a PR government would recover the estimated RM7 billion it would forgo.

But he was quick to add that the auto tax plan would be used as a "major election campaign" in the coming general election. Is this really a pressing election issue?

Have we heard about PR's plans to build affordable housing for the rakyat or create more jobs for our school leavers and university graduates?

His main contention is that car prices in Malaysia are "extremely high", which he blamed on the automotive policy he claimed was designed to "protect Barisan Nasional cronies".

Is this the case? Both Proton and Perodua are national car projects that employ thousands of workers and add lots of value to the national economy.

Slashing excise duties will bring down the prices of imported cars closer to the national marques, thus making Protons or Peroduas less attractive to buyers. If car maker Proton is gone, not only the related industries, but also more than 100,000 jobs will be affected.

The drastic drop in new car prices will also undermine the used car market and hurt banks which have a large portfolio of auto financing.

Just recently, the opposition proposals, such as abolishing the PTPTN student loan scheme costing RM45 billion and a RM4,000 minimum wage policy, proved to be far from realistic.

Many simply dismissed the call to abolish the PTPTN as an opposition ploy to win over new and young voters.

What the opposition has failed to do is to identify new sources of revenue to make up for the forgone taxes. In the case of car excise duties, they talked about revamping the Approved Permit (AP) system but shed little light on the details.

As again, the devil is in the detail.

One minister was quick to attack Rafizi's auto tax fantasy.

"Pakatan Rakyat has been promising the Malaysian community everything they can think of without serious consideration of the revenue of the country," Housing and Local Government Minister Datuk Seri Chor Chee Heung told a news portal. "PR always comes up with knee-jerk initiatives."

Pointing to PR's promises in its Buku Jingga (the Orange Book), Chor warned that if the opposition comes to power, "within one year, the whole country will collapse".

The PR car tax plan, as it stands, may remain as a mere fantasy.

Proton and Perodua are national car projects that employ thousands of workers and add lots of value to the national economy.

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