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Malaysia Urged To Raise Road Tax

by Mary Swire, Tax-News.com, Hong Kong

06 December 2012


During his speech at the recent Malaysian Institute of Economic Research’s National Economic Outlook Conference, former Finance Minister Tengku Razaleigh Hamzah has suggested that a start could be made to remove petrol subsidies by imposing higher road taxes on larger cars.

Many, including the International Monetary Fund, regard the removal of general and untargeted subsidies as an imperative for Malaysia, as they are regarded as reducing government revenues, impeding the proper allocation of resources in the country, and stopping the targeting of proper assistance to lower-income groups.

As the lower pump prices caused by the present high fuel subsidy raise consumption, and the subsidies themselves divert the government’s oil revenues from promoting investment for economic development, Tengku Razaleigh said that ways should be found to begin subsidy removal.

He proposed that the petrol subsidy could be implicitly removed from the owners of large-engined vehicles by means of a higher road tax. While he was aware that the measure would only be, in effect, a small start in reducing subsidies, it could prompt other measures to reduce subsidies over a longer period without causing adverse social consequences.

TAGS: tax | vehicle tax | oil and gas | Malaysia | tax breaks

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