Wednesday 26 September 2012

Time for cheaper houses and cars — Lim Sue Goan

SEPT 24 — Members of the general public have always looked forward to the annual Budget but their wishes rarely came true over all these years. Lowering car and housing prices should be among the people’s expectations this year.

Many car owners have been paid more for cars over the past 30 years because of the national car protection policy. It was rumoured that the government might restructure the vehicle tax system following the car excise duty reduction movement of the PKR. Therefore, many people have put their car-buying plans on hold while waiting for a good news. The motor vehicle sales in August this year had dropped by 12.9 per cent or 7,644 units compared to the same month last year.

To bring prices down, the first condition would be to amend the National Automotive Policy, to revoke the protection for national cars and fully open the motor vehicle market. However, we have not heard so far of anything about amending the policy in such direction. Therefore, even if there is a vehicle-tax system restructuring, it would be at a modest rate and no big impact is expected to affect foreign car prices, since they still have to protect the status of national cars.

Today, we still need at least RM70,000 to buy a foreign car. The high prices are because of three taxes, namely the import duty, excise duty and sales tax. The government imposes 125 per cent of taxes on an ASEAN-assembled car and 145 per cent on a completely built-up (CBU), what more cars from outside the ASEAN region.

Among the three taxes, the excise duty charges the most, ranging from 65 per cent to 105 per cent. Therefore, Malaysians have to pay over RM50,000 of excise duty to buy a foreign car costing RM100,000. If it is revoked, car prices might dropped by 51 per cent, which would be much better than distributing the RM500 BR1M aid for 100 times.

However, the annual motor vehicle sales recorded sales of 600,000 units. Would the government let go of such a huge amount of income? What should the government use as a replacement if the taxes are revoked?
Housing prices have also risen outrageously. According to the international standard, the reasonable range for housing prices should be at three to six times the annual household income. Considering housing loan factors, a person’s housing consumption should account for less than 30 per cent of his or her income.

However, housing prices in urban areas have kept soaring, particularly in Klang Valley where many houses are priced over a million ringgit. Based on the Malaysian per capita income of RM28,000, we have to spend all their income to repay the loan for 36 years, without eating and drinking, if we wish to purchase a house priced at a million ringgit.

Deputy Prime Minister Tan Sri Muhyiddin Yassin revealed that the Budget 2013 will accelerate the implementation of an affordable housing plan to build more houses costing RM300,000 and below.
However, even if the Syarikat Perumahan Negara Bhd (SPNB) delivers 50,000 costing RM300,000 and below next year, it would still be unable to meet the needs of middle-income earners and curb the rising prices.

If the government gives incentives to encourage private sectors to help building such houses, it would mean to subsidise developers by using the people’s money. It would only be a temporary, instead of a long-run, solution.

The best strategy would be to restore the real property gain tax (RPGT) at up to 30 per cent. Currently, gains from property held for less than two years were subjected to a 10 per cent tax while a 2 per cent was imposed for properties held between two and five years, and those who kept it for more than five years are exempted from tax. Raising the RPGT can help curb real estate speculation, increase national revenues and indirectly reduce car taxes.

The high vehicle and housing prices have hindered Malaysians from enjoying a high quality life while lowering the happiness index and gradually weakening the people’s spending power. If the BN wishes to fight for more votes, it should truly put the “people first” slogan into actions by alleviating the two biggest burdens of the people. —

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