In Malaysian Fuel Prices / By Paul Tan / 1 November 2014 10:03 pm / 190 comments

The government will discuss the possibility of introducing a sales tax for RON95 petrol if global crude oil prices continued on a downward trend at a Fiscal Policy Committee meeting next Wednesday, said Deputy Finance Minister Datuk Ahmad Maslan in a report by Bernama.

He gave an example of charging a sales tax of RM0.58 per litre if the price of RON95 fell to RM1.72 per litre, which would bring the total price for the consumer up to the current price of RM2.30 per litre.

RM0.58 is a hefty 33.72% out of the RM1.72 example price given, but we don’t think a fixed 33.72% tax is what the minister meant. Although Bernama’s report doesn’t specify any formula in particular, we think the intention is to keep the RM2.30 price fixed, and just collect the difference as a tax.

This means if the market price is RM2.10, the difference between RM2.30 and RM2.10 which is RM0.20 would be collected as tax, instead of the same RM0.58 example.

The minister said the other choice would be for the government to simply reduce the price of RON95 down to RM1.72 per litre, but noted that it would mean the government would not be able to collect revenue for the country’s development.

According to the minister, the government paid RM23.5 billion in 2013 and RM21 billion in 2014 so far to petroleum companies for petrol subsidies, it needs to recoup the amount. A fuel tax would allow for this.