No cut in car duties until new tax found, says minister

A Proton Inspira car is displayed at a Proton Edar showroom in Selangor in this file photo. The government has no plans to cut excise duties on cars unless an alternative source of revenue is found, says a minister. – AFP pic

 The government will not cut excise duties on cars to make them cheaper for the public, Minister of International Trade and Industry Datuk Seri Mustapa Mohamed said today.

Mustapa explained that excise duties contribute RM7 billion to the government’s budget, saying that Putrajaya will not slash the taxes on cars unless an alternative source of revenue is found.

“If you sacrifice RM7 billion, the issue for the government, where do you find the RM7 billion, where’s it coming from?”

“At this point of time, it’s not something that the government is considering,” he told reporters after launching the ministry’s 2012 report.

“Reduction in excise duties doesn’t mean reduction in prices because some companies are already paying nominal excise duties because they use a lot of local components,” he added, highlighting local car manufacturers Proton and Perodua.


Malaysia’s usual excise duty on cars range from 65 to 105 per cent.

Mustafa explained that the government’s existing policy was to impose lighter excise duties on companies that use more local components for their cars.

He said that car prices are influenced by four factors, namely excise duty, sales tax, car companies’ cost of production and profit margins.

He suggested that car companies could cut down on their profit margins to deal with the intense competition, which would in turn influence car prices.

“There’s a lot more competition now and market forces will determine the prices,” he said.

Mustapa indicated that the recent announcement of cheaper car prices by local car companies Proton and Perodua was consistent with the government’s estimate in its electoral pledge.

Before the May 5 general election this year, the Barisan Nasional (BN) pledged to gradually cut car prices by 20 to 30 per cent.

BN’s political rival Pakatan Rakyat had also promised to lower car prices by slashing taxes on cars if it were voted into power.

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