Deputy Minister of International Trade and Industry Ong Kian Ming speaks during a discussion on ICAEW’s economic report at the Hilton Kuala Lumpur December 4, 2018. — Picture by Yusof Mat Isa

KUALA LUMPUR, Jan 25 ― The federal government is considering imposing less excise duties for vehicles, which would mean lower car prices, and in turn lead to higher car sales that would offset the reduced revenue for the government.

Deputy International Trade and Industry Minister Ong Kian Ming said such a move would be beneficial to Malaysians, the industry and the government.

“Of course, there is a cost-benefit involved here in the sense that you have more tax reduction in the excise duty. The government may collect less per unit, but whatever revenue lost by the Finance Ministry can be regained by the increase in the sales volume because car prices would be lower.

“The original equipment manufacturers (OEMs) get to sell more cars, consumers get to benefit from lower car prices and the Finance Ministry gets to benefit as well, when it gets to collect more excise tax as a whole because of increased volumes. This is something we want to work towards for all car models,” he was quoted saying by local daily The Star’s financial pullout StarBiz.

He also said that the automotive industry is expected to provide estimates of the volume of additional sales if there are more exemptions in the excise duty.

Malaysians pay high prices for cars due to protectionist measures introduced in the past to shield local carmakers from competition.

According to data on the Malaysian Automotive Association’s website , excise duties collected for passenger cars and other motor cars fall within the range of 60 per cent to 105 per cent, depending on the vehicle’s engine capacity.

This is on top of a 10 per cent sales tax, as well as an import duty of 30 per cent for completely built up (CBU) or 10 per cent for completely knocked down (CKD) units if the vehicle is not from an Asean country, although the imposition of CKD import duty also depends on the engine capacity.

For commercial vehicles, no excise duties are collected and there is only a 10 per cent sales tax, along with a 10 per cent import duty if a CBU unit is not from Asean.