Don’t subsidise fuel, don’t tax cars

Sunday April 6, 2008

I AGREE with Dzof Azmi's argument in Fuelling trouble with petrol subsidies, (Contradictheory, StarMag, March 30) that the Government cannot afford to subsidise petrol and keep prices artificially low forever.

However, I want to point out that when you talk about the price of petrol, you have to also talk about the price of cars in Malaysia. These two items go hand in hand, something that Dzof failed to mention.

If one expects the rakyat to pay the real price of petrol (say, RM3 per litre) in the future when the petrol subsidy is zero, then the price of cars must also be real, ie, be tax free.

If one expects the people to pay the full, real-world price of petrol – and I must say it is a perfectly reasonable expectation – then the rakyat expects, also reasonably, to buy cars at real-world prices, without the exorbitant taxes currently imposed.

For example, a Toyota Corolla at the real price of US$19,000 (RM60,500) instead of artificially high at RM117,000.

Now, when the average consumer buys a car, he has already paid (in the form of import duties, excise duties, and sales tax) to the Government, in advance, a sum greater than the petrol subsidy he can expect to enjoy over the time he owns the car.

Let me give you an example.

If a consumer buys a Toyota Corolla at RM117,000, the tax he pays, up front, to the Government is more than RM50,000.

Then, he enjoys the fuel subsidy each time he fills up with petrol. To benefit from the RM50,000 that he has paid, in advance, it will take approximately 16 years (assuming he uses 60 litres of petrol a week and the subsidy is RM1 per litre)!

So, it is not fair to say that the subsidy of petrol has to be reduced or removed when the commodity price goes up, without reducing or abolishing the hefty taxes on cars.

You can’t use the “cheapest petrol in South-East Asia” and “price of crude oil has skyrocketed” excuses to justify the reduction in petrol subsidy as long as the ridiculously high tax is imposed on cars.

The rakyat won’t buy your story because we know that we, as motorists, have already paid for the petrol “subsidy”. In advance.

Jimmy Wah, Bayan Lepas, Penang