Govt has no plans to review automotive sector's tax structure, says Zafrul - MIDA | Malaysian Investment Development Authority
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Govt has no plans to review automotive sector’s tax structure, says Zafrul

Govt has no plans to review automotive sector’s tax structure, says Zafrul

23 Feb 2023

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 Ministry of International Trade and Industry.

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

“This (the excise duty) is meant to encourage local vendors to participate in the development of the automotive industry in Malaysia,” he said during the oral question-and-answer session in the Dewan Rakyat on Thursday (Feb 23).

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

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

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 and CKD vehicles, as well as imported components, are able to enjoy much lower rates of import duty, even up to 0%, 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 (Perikatan Nasional-Padang Rengas), Tengku Zafrul explained that the excise duty on affordable vehicles, especially cars priced below RM50,000 each, is only between 2% and 5%, compared with the higher excise duty rates of between 60% and 110% 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 the components used, transport and logistical costs, insurance, loan rates and technology costs.

Source: Bernama