Pakatan Rakyat's election pledge will include abolishing excise duties on cars to reduce household debt and increase disposable income.
According to PKR strategy director Rafizi Ramli ( left ), a whopping 72 percent of households currently own cars and are paying almost double the actual value of the vehicle due to excise duties.
Rafizi said this was an easy and viable strategy to increase disposable income, which is among Prime Minister Najib Abdul Razak's main goals.
"Between raising household incomes and reducing outlays (on cars) which improves a household's disposable income, any economist will tell you its easier to reduce outlays," he told a press conference at the PKR headquarters in Petaling Jaya this morning.
Also present were PKR communications director and Sri Setia assemblyperson Nik Nazmi Nik Ahmad, Pantai Jerejak assemblyperson Sim Tze Tzin and PKR national strategy and policy bureau secretary S Gobi Krishnan.
70 percent too taxing
The matter, Rafizi said, had been discussed at the highest level of PKR and Pakatan Rakyat and the details would be officially announced by the top leadership in due time.
Citing the recently published 'Household Income and Basic Amenities Survey Report 2009', Rafizi said the move would greatly alleviate the people's financial burden as the report states 72 percent of households own a car.
Furthermore, he said, the debt due to car loans had spiked by RM16 billion or 14 percent within 18 months, up from RM118 billion in November 2010 due to the government's existing National Automotive Policy which was officially launched in 2006.
"The automotive policy by Umno and BN has caused car prices to skyrocket, causing debt that has to be borne by the people," he said.
At present, Rafizi explained, the cheapest tax imposed on vehicles such as the Perodua Kancil is 70 percent, of which 60 percent is excise tax and another 10 percent, sales tax.
The sum increases to 100 percent if the car is imported as it will incur an additional 30 percent import tax.
"So if you're buying a RM40,000 car manufactured locally, you're paying RM16,000 in taxes," he said.
Taking loans to fund taxes
Pre-empting allegations of Pakatan populism, Rafizi said the main purpose of the move was to prevent people from having to take up loans to finance the government’s hefty taxes.
"Collecting taxes from car prices is not sustainable as car loans will balloon and the household debt as a percentage of gross domestic product will balloon as well.
"The household debt now is almost RM800 billion, that's double the national debt," he said.
Rafizi said Pakatan projects that the federal government to lose about RM8 billion annually without excise duties - and this shortfall could be addressed by other means.
"If there is a fiscal gap, we can use other mechanisms (to retrieve taxes). You should not penalise people by collecting taxes through necessities such as a car," he said.
He added that PKR would push with its new manifesto, just as it did with the with the campaign to abolish the PTPTN student loans to add political pressure, since the government was in the midst of reviewing the National Automotive Policy.
Rafizi fingers Khairy
Rafizi also took a swipe at Umno Youth chief Khairy Jamaluddin, who debated the PTPTN issue with him, saying that Khairy was in some way responsible for the artificially high car prices under the National Automotive Policy.
"When the National Automotive Policy was being drafted, Ethos Consultancy, which has its origin with Khairy was consulted. Even though he eventually left, either way, he was instrumental in drafting the policy during former prime minister Abdullah Ahmad Badawi's time.
"So, Khairy has a lot to answer as well.... He should share insight into what was the consideration in 2005 (when the policy was drafted) that caused the government to introduce such high excise duties that are more regressive on the people," Rafizi said.
He explained that in 2005, when Malaysia signed the Asean Free Trade Agreement (AFTA), the country was required to reduce its import taxes. As a result, then premier Abdullah's team decided to introduce a high excise tax across the board as replacement.
"The same consulting group is now in the Government Transformation Programme and Economic Transformation Programme, so most probably the same kind of people will be involved in the review of the Malaysian Automotive Policy.
"So, before they get another hand to create the kind of mess they created seven years ago, let's hear from Khairy and Ethos Consultancy," he said.
Rafizi added that the party welcomes feedback from the people and would begin its roadshow on this matter on Aug 5.