The party is committed to the dismantling of the AP system as the new formula announced today is merely a temporary thing.
PETALING JAYA: PKR today revealed a “better” way to manage the way in which Approved Permits (APs) are issued, suggesting that it should be subjected to an open bidding system until it is finally abolished latest by 2015.
In a press conference today, the party’s strategy director Mohd Rafizi Ramli stated that the party is committed to the dismantling of the AP system as the new formula announced today is merely a temporary thing.
Elaborating on this new proposed “formula”, Rafizi said that between 2013 and 2015, the steps that should be taken to get the “best value”from issued APs was:
to subject the sales of APs to a public open bidding, with various starting prices according to the car category and its fuel consumption. This is to encourage more energy-efficient cars on the roads; and
the starting price of the bidding should be fixed at RM10,000 for energy-efficient cars; RM20,000 for normal; RM30,000 for high-powered vehicles that consume a lot of fuel.
Rafizi estimated that the average price for each AP, through this new bidding system, would come up to RM40,000. He said this is already about the current price AP holders charge when selling off their Aps with a mark-up of some RM30,000.
“With an estimate of 70,000 APs being issued each year, this would bring in RM2.8 billion each year for the government,” he said.
Rafizi said that he was sure this would lower car prices when applied in tandem with the proposal to phase out car taxes as announced last week.
He said that the “whole mechanism” will be announced on Thursday by Opposition Leader Anwar Ibrahim, including concerns over how Pakatan Rakyat’s proposed revamp of National Automotive Policy (NAP) will affect second-hand cars and unsettled car loans.
Rafizi again disputed arguments by several parties, including Barisan Nasional leaders, that cutting excise duty will affect the government’s income and destabilise the economy.
Spur economic growth
He said that what they were saying was incorrect, as the uncollected RM7 billion in excise duties and RM1billion in sales tax would be returned to the people through a multiplier effect.
“This amount would be spent by the people through various means back into our economy and would in turn spur economic growth. This would then increase government’s earnings through other taxes by individuals and companies, which are earning more. The RM8 billion will be [spent locally], it is not going out of the country.”
“Economically, the multipliar effect is a lot better than when you give it to the government, especially when you announce projects here and there. The question here is finally, ‘Who can manage the public money better?'” he said.
Rafizi said this, coupled with the better AP management as proposed by PKR, would effectively increase government earnings.
“The combination of these steps will make sure that government revenue would not be dramatically affected from the abolishing of excise duty in stages,” he said.
He also pointed out that the BN government had failed to fulfil its promise to abolish the AP system earlier when the NAP was announced in 2005.
“The AP system was supposed to be abolished by Dec 31, 2010. It should have been eliminated and dismantled, but instead, in 2009, they [the government] announced that they would extend it by five years to 2015,” he said.
Rafizi said that under Pakatan, the coalition would honour the agreement with the World Trade Organisation (WTO) and the Asean Free Trade Area (AFTA) to abolish AP by 2015.
He said that he expects BN to prolong it to 2020 as it is “such a lucrative income”.
“The AP system has not only made cars expensive but it has only benefited a few parties close to Umno, BN… it is considered something of a cartel right now,” he said.
He recalled that Prime Minister Najib Tun Razak, during the Budget 2010 speech, had announced that each AP will be sold at RM10,000 and it will be channelled into a fund to aid Bumiputeras.
He said that in 2011, 600,123 vehicles was registered and of these, 533,515 units were assembled in Malaysia, which meant that 66,608 APs were issued for imported cars.
“This would mean that there would have been RM666 million [in the fund] every year to help the Bumiputeras. It is a huge amount, and I doubt this amount was ever spent. Was there any news of this fund?”
Cartel marking up AP prices
Elaborating on the AP revamp, PKR deputy information chief Sim Tze Tzin said through bidding, money from AP would go back to the government.
“Right now, Malaysians pay too much for their cars. In the US, a Toyota Camry costs RM75,000 but it is RM180,000 [here]. So if you have a RM3,000 salary in the US you can afford it, but in Malaysia, you can’t.
“With the new system, maybe those earning RM3,000 a month can’t buy it yet, but those earning , say, RM5,000 to RM6,000 can afford it. That’s what we mean by giving money back to the people.”
He said that figures from 2004 and 2005 showed that 60% and 43% of APs, in the respective years, go to three big corporate figures.
Meanwhile, Rafizi said that the new AP system would give the country about RM2 billion to RM3 billion each year, and this would in effect cushion the removal of the excise duties.
Asked how would the new system prevent manipulation and marking-up of AP prices as he had alleged had happened in the past, Rafizi said that with greater competition between bidders, distributors will be forced to adhere to market price.
“Currently, there seems to be a cartel of four or five people who can mark up the price of APs among themselves by RM30,000 to RM40,000. We want to reverse that and make things
competitive. With bidding, the money goes back to the government,” he said.
“I believe that when the market is more competitive, it will be more difficult for the ‘cartel’ to dictate the price. There will be other players to lower it down,” he said.
Rafizi also said that PKR plans to promote the idea that AP or imported cars should only be for luxurious cars.
“Almost 90% of cars are manufactured locally and we want to encourage more production
lines for locally assembled cars. That would make the products cheaper,” he said.
Asked why PKR would not abolish AP outright, he said that between the choice of abruptly abolishing it and phasing it out, it is better that there is no “big disruption in the market”.
Last Tuesday, Ramli said Pakatan will “completely revamp” the NAP and slash the triple-tax burden – excise and import duties and sales tax – imposed on cars if it takes over Putrajaya in the next
He said that phasing out car taxes will boost disposable income and reduce household debts.
He said that currently, taxes increased the price of a car by at least 70% for lower capacity cars (below 1,500cc) or over 100% for those with higher capacity.
Rafizi also said a revamp of the AP system would also be among the measures in the proposal. (It was previously announced that the termination of APs for used vehicles would be implemented by 2015 while franchised APs by 2020.)
Malaysians are currently paying duties of between 65% and 105% on cars they buy on top of the 10% in sales tax, which is among the highest in the world. This meant that if a Malaysian consumer paid RM100,000 for a car, as much as RM55,000 went to the government.
Rafizi’s announcement drew flak from some BN leaders, with Umno Youth chief Khairy Jamaluddin saying that it was not feasible as it was “economically unsustainable”. The Rembau MP had said it would cost the government RM4.6 billion a year.
Minister in Prime Minister’s Department Nor Mohamed Yakcop said that the nation would go bankrupt if Pakatan was allowed to go ahead with its plans, which would cost RM8 billion in taxes and affect development, especially in rural areas and Sabah and Sarawak.
The Malay Vehicle Importers and Traders Association (Pekema) had reportedly welcomed Pakatan’s pledge, but said that it was sceptical the opposition pact will be able to live up to its promise in the run-up to key national polls due soon.
Kuala Lumpur Malay Chamber of Commerce president Syed Amin Al Jeffri was also quoted as saying reducing taxes would result in cheaper cars, but would affect government income.
He warned that a different form of tax would probably need to be imposed on consumers.
Customs director-general Khazali Ahmad has also been quoted in the media as saying the Customs Department’s biggest revenue comes from excise duty for local and imported cars.
He said the nation’s development, including social health and education, would be adversely
affected if Pakatan reduces these taxes.
FMT also reported that used-car dealers feared that the sudden decrease in taxes will affect the value of second-hand cars and pose problems for those still bonded to their loans.