Govt has no plans to review automotive sector's tax structure - Miti

KUALA LUMPUR - The government has no plans to review the existing tax structure for the automotive sector, particularly the excise duty which is important for the industry’s development, said the International Trade and Industry Ministry (Miti).

Its minister Tengku Datuk Seri Zafrul Abdul Aziz said excise duty plays a crucial role in encouraging value-added activities, especially local assembly (completely knocked down or CKD) activities and vendor development.

"This (excise duty) is meant to encourage the local vendors to participate in the development of the automotive industry in Malaysia," he said during the oral question-and-answer session in Dewan Rakyat, today.

Replying to a supplementary question from Datuk Seri Wee Ka Siong (BN-Ayer Hitam), Tengku Zafrul said the government has offered tax incentives in the form of exemption on or reduction in excise duty and sales tax.

The government has also provided import duty exemption and reduction for imported components in local vehicle assembly activities, he said.

The minister said the rate or level of incentives provided is subject to the merits of the business plan, such as the amount of investment, vendor development, especially for local vendors, technology transfer, and export plans.

"In addition to the incentive assessment mechanism for the reduction in vehicle duties and taxes, automotive products such as completely built-up (CBU) and CKD vehicles, as well as imported components, are able to enjoy much lower rates of import duty, even up to zero per cent, under the Asean Trade in Goods Agreement," he said.

He said the approach would enable the government to develop a competitive local automotive industry through economic goods generated from value-added activities while also expecting vehicle prices to be reduced.

Responding to a supplementary question from Azahari Hasan (PN-Padang Rengas), Tengku Zafrul explained the excise duty for affordable vehicles, especially cars priced below RM50,000, is only between two and five per cent compared to the higher excise duty rates of between 60 and 110 per cent for luxury cars.

"We hope that with technological advancements, car prices will drop along with higher demand in the future," he said.

He also noted that vehicle prices are not controlled by the government but are influenced by market forces, namely the costs of components used, transport and logistical costs, insurance, loan rates and technology costs. - BERNAMA