Easy money, who can let it go?

The Government just announced that excise duties on cars will remain, dashing hopes of any reduction in car prices. Excise duties generated RM7.09 billion in 2012. Together with other forms of taxes, the Federal Government collects RM11.14 billion in 2012 from the car industry.

This RM11.14 billion is equivalent to 48% of personal income taxes, 22% of corporate taxes and 33% of petroleum taxes. For 2013, this revenue source is likely to be higher. The Edge Malaysia carried a thorough report and analysis of the Malaysian automobile industry in the January 6, 2014 issue.

At a time when fiscal restraint is critical to rein in the budget deficit, to counter possible credit rating downgrades and capital outflows, this revenue source is proving too hard to let go.

In the same announcement, the Government has deferred any decision on removing the approved permits (APs) system for importing cars into Malaysia.

In a system where a few individuals can make huge amounts of money by simply being granted the rights to bring in cars, this easy money is too hard to let go. For the interest of making a few rich elites richer, the rest of the population continue to suffer high car prices.

Here is an idea. Remove the excise duties and the Government owns all the APs. Profits from the APs now become Government revenue, replacing the excise duties. And removing the excise duties lowers the price for cars. So, why not?