International Trade and Industry Minister Mustapa Mohamed said the government has no plans to slash excise duty as a means to reduce car prices.

 

“The government has no intention to reduce excise duty for vehicles - that is now among the main source of income for the country - as an effective means to reduce car prices,” he was quoted as saying in Berita Harian today.

He said maintaining the car excise duty was important in the government’s effort to reduce the country’s deficit.

“This (car excise duty cut) will cause the country to lose RM7 billion a year in revenue thus complicating the government’s effort to reduce the fiscal deficit,” he was quoted as saying.

He added that any plans to slash car excise duty must be compensated by an alternative source of income.

However, Mustapa said the BN-led government will keep its promise of reducing car prices but through other means.

‘Car prices will still go down’

An example, he reportedly said, was by encouraging car producers to use local components, which comes with an incentive of reduced excise duty for the parts.

“Therefore when the duty charges (for parts) go down, they (car producers) can reduce sales price to buyers in a more effective and organised way,” he was quoted as saying.

The country’s revenue from car excise duty in 2007 was RM4.7 billion, followed by RM 6.2 billion in 2008, RM5.7 billion in 2009, RM7.1 billion in 2010 and RM6.5 billion 2011.

Pakatan Rakyat had in its manifesto before last month’s general election pledged to reduce car prices by doing away with the car excise duty in stages.

BN later followed suit with a similar promise, but said it would rely on “market forces” to reduce car prices between 20 percent and 30 percent of the original prices.