I refer to the malaysiakini report Cukai jalan turun berkuatkuasa Isnin ini which says that road tax for all private vehicles will be reduced between 4% and 33% from Jan 1, 2007. It is envisaged that this will result in a revenue loss of RM250 million to the government. However, this is nothing to be excited about as the reduction has been expected.

It has been expected given the huge increase of toll rates from 20% to 60% for certain highways starting from Jan 1, 2007.

Now, broadly speaking, the government would not just rely on road tax to pay for its infrastructure's development budget which will include the building of new roads. Strictly speaking, road tax is the road-use cost that is paid to the government for the funding of road improvements, maintenance works and for new road constructions.

These functions, however, have now been privatised with the likes of the North-South Expressway and the Lebuhraya Damansara-Puchong highway projects. In return, the private enterprises charge toll rates for the public use of these highways.

In other words, this new private system has shifted road-use cost from being a tax paid to government to a charge paid directly to a highway operator. Hence, the reduction in road-tax in light of the increase in toll rates is expected given its fiscally neutral meaning.

But it should be noted that road tax is just a one-time annual cost to us. However, toll-rates are, on average, a recurrent cost. A reduction of road tax, for example by RM48, can easily be neutralised by 40 days of usage of the Damansara Puchong highway (calculation: a twice daily average use x RM0.60 being the toll rate increment = RM1.20; RM48/RM1.20 = 40).

Assuming that the road user uses the same highway for an assumed period of 200 days, based on the same computation, the user will be in a deficit of RM192 at the end of year.