According to PKR strategies director Rafizi Ramli (left), a whopping 72 percent of households currently own cars and are paying almost double the actual value of the vehicle due to excise duties.
He said this was an easy and viable strategy to increase household income, which is among Prime Minister Najib Abdul Razak's main goals.
"Between raising household incomes and reducing outlays (on cars) which improves a household's disposable income, any economist will tell you its easier to reduce outlays," he told a press conference.
Also present at the press conference were PKR communications director and Sri Setia state assemblyperson Nik Nazmi Nik Ahmad, Pantai Jerejak state assemblyperson Sim Tze Tzin and PKR national strategy and policy bureau secretary S Gobi Krishnan.
Citing the recently published 'Household Income and Basic Amenities Survey Report 2009', Rafizi said the move would greatly alleviate the people's financial burden as the report states 72 percent of households own a car.
Furthermore, he claimed that debt due to car loans had spiked by RM16 billion or 14 percent within 18 months, up from RM118 billion in November 2010 due to the government's existing National Automotive Policy which was officially launched in 2006.
"The automotive policy by Umno and BN has caused car prices to sky-rocket causing debt which has to be borne by the people," he said.
At present, Rafizi explained the cheapest tax imposed on vehicles 1,500cc car such as the Perodua Kancil, was at 70 percent, of which 60 percent is excise tax and another 10 percent from sales tax.
The sum increases to 100 percent if the car is imported as it will incur an additional 30 percent import tax.
"So if you're buying a RM40,000 car manufactured locally, you're paying RM16,000 in taxes," he said.
Taking loans to fund taxes
Pre-empting allegations of Pakatan populism, Rafizi said the main purpose of the move was to prevent people from having to take up loans to finance the government’s hefty taxes.
"Collecting taxes from car prices is not sustainable as car loans will balloon and the household debt as percentage of gross domestic product will balloon as well.
"The household debt now is almost RM800 billion, that's double of the national debt," he said.
Rafizi said Pakatan projects that the federal government will lose about RM8 billion annually without excise duties but this shortfall can be addressed by other means.
"If there is a fiscal gap, we can use other mechanism (to retrieve taxes). You should not penalise people by collecting taxes through necessities such as a car," he said.
He added that PKR will push with this new manifesto just as it did with the with the campaign to abolish the PTPTN student loans to add political pressure as the government is in the midst of review the National Automotive Policy.
"When the National Automotive Policy was bring drafted, Ethos consultancy which has its origin with Khairy was being consulted. Even though he eventually left, either way, he was instrumental in drafting the policy during former prime minister Abdullah Ahmad Badawi's time.
"So he has a lot to answer as well.... He should share insight what was the consideration in 2005 (when the policy was drafted) which has caused the government to introduce such high excise duties that are more regressive on the people," he said.
Rafizi explained that in 2005 when Malaysia signed the Asean Free Trade Agreement (AFTA), the country was required to reduce its import taxes. As a result, then premier Abdullah's team had decided to introduce a high excise tax across the board as replacement.
"The same consulting group is now in the Government Transformation Programme and Economic Transformation Programme so most probably the same kind of people will ve involved in the review of the Malaysian Automotive Policy.
"So before they have another hand to create the kind of mess they created seven years ago, let's hear from Khairy and Ethos Consulting," he said.
Rafizi added that the party is welcoming feedback from the public and will begin its road show on the matter on August 5.