The Prime Minister has issued a statement that imported cars will not be any cheaper because domestic taxes will still be levied on them. AFTA only requires import taxes to be removed. But he also goes on to say that locally-made cars (such as our venerable Proton) will be subject to the same taxes. Taken in its entirety, Dr M's statement leaves some questions begging to be asked.
Damn. I wanted this in 2005
1. What's the point of putting domestic taxes on imported and local cars? Ok, some income will be generated for the nation from the taxes, but surely, such "creative taxation" policies goes against the spirit of AFTA if not the letter.
2. If our national cars are going to be equally taxed (there is some doubt in this; at the last moment, i suspect special "tax breaks" may be awarded to continue the protection the national cars enjoy), how will they remain competitive? The only reason why local cars are cheaper OTR (On-the-road) is because that import taxes double (and at times, triple) the retail price of an imported car. Will the "domestic taxes" proposed be higher for "imported" cars? Or will the domestic tax be equal for ALL cars? If this is true, then "imported" cars of the same class will still be cheaper than our Proton and Perodua; foreign car makers have economics of scale on their side and can afford to enter a loss-leader strategy to attract Malaysian consumers. Under such circumstances, Proton and Perodua's market share will be severely eroded even if they are able to lower their costs of production and the retail price of their products.
If this happens, and they both begin losing money, will the rakyat be called upon to bail them out? Encore MAS, encore Perwaja Steel??
Published in Malaysiakini.com on 8 November 2002