Use car tax provision wisely

Publication: NST

Date of publication: Aug 2, 2012

Section heading: Main Section

Page number: 018

Byline / Author: By Jeong Chun Phuoc

THE article Downside of removing car taxes (NST, July 29) by S.M. Nasarudin S.M. Nasimuddin (Naza Group of Companies joint executive chairman) is especially candid from an automobile industry perspective.

In no way is this more apparent than in the statistic shared by S.M. Nasarudin in highlighting the negative impact on the gross domestic product (GDP), besides the loss to both automobile companies and consumers, as a direct result of a complete removal of car taxes.

The debate on the total removal of car taxes is not without the underlying perils of exerting inadvertent pressures on the national economy, which is struggling to achieve progress within the national key economic areas (NKEAs) framework.

As a general rule, for the consumers particularly, any reduction in taxes is welcome news. The proposed Goods and Services Tax (GST) to replace the old Sales and Services Tax (SST) (of five per cent and 10 per cent respectively) is to primarily improve tax collection and invigorate the economic machinery of Malaysia.

Increasing the collection in taxes will augur well in the construction and maintenance of public infrastructure and amenities for the people. The GST is a vital tool in achieving economic wellbeing.

Since 2004, when the GST proposal was announced in Budget 2005, numerous public awareness programmes have been carried out by the government to educate the general public and the business community (Preparing for the GST, NST, Dec 9, 2010). This includes efforts to counter GST misperception and concerns.

Seven years have passed, and it is understood that both the public and private sectors have established administrative and technical set-ups to incorporate the new GST system.

The GST policy manifest and its advantages are well documented in nearly 140 jurisdictions which have embraced the GST system - the closest example is Singapore.

The recent enactment of the Price Control and Anti-Profiteering Act 2010 has set a positive momentum for the final execution of the GST. What remains to be seen is the need for immediate GST implementation.

The GST, in essence, will address the inherent weaknesses in the current SST system and hence, any delay will imperil the achievement of overarching public interest objectives delineated under the Economic Transformation Programme (ETP).

As a matter of fact, the recent pronouncement of six Strategic Reform Initiatives (SRIs) can be accelerated along the GST revenue framework to achieve competitiveness in the realisation of core economic transformation blueprints.

In the same way, if car taxes are to be removed, the public and stakeholders must be assured it will not cause immediate catastrophic downstream impact on all stakeholders and consumers. At this point of debate for and against car taxes, advocates for the complete repeal of car taxes provide no assurances to the concerns raised by S.M. Nasaruddin.

This is, of course, not to say that car taxes are always good for the economy and consumers, because car tax to foreign automobile exporters is no music to their ears.

Car taxes are just another accepted form of economic strategy observed in both developed and developing countries to protect core national assets and interests at home, in light of the nebulous World Trade Organisation provisions on the dismantling of tariffs on all goods and services at the global platform. Whether car taxes are a boon or bane for the economy, this must be addressed in a fair, transparent and objective manner, similar to the case for GST to replace the old SST. To argue against car taxes without evidence is like putting the cart before the horse.

Jeong Chun Phuoc, Shah Alam, Selangor