The government has no plans to review the tax structure for the automotive sector, in particular that of excise duty because it is important for the industry’s development, according to minister of international trade and industry Tengku Datuk Seri Zafrul Tengku Abdul Aziz.

He explained that maintaining the current level of excise duty was important, since it plays a crucial role in spurring activities such as local CKD assembly (CKD) programmes and vendor development, as Bernama reports. “This is meant to encourage local vendors to participate in the development of the automotive industry,” he said during the question-and-answer session in the Dewan Rakyat earlier today.

Tengku Zafrul, who was responding to a supplementary question from Datuk Seri Wee Ka Siong (BN-Ayer Hitam), said the government was already offering tax incentives in the form of exemptions or reductions in excise duty for local assembly as well as an exemption or reduction in import duty for components brought into the country for CKD programmes.

He said that the rate or level of incentives provided is dependent on the merits of a business plan, and these include items such as the amount of investment, vendor development, technology transfer and export plans.

He added that automotive products such as completely built-up (CBU) and CKD vehicles as well as imported components currently enjoy much lower rates of import duty, even up to 0%, under the Asean Trade in Goods Agreement.

To a supplementary question from Azahari Hasan (PN-Padang Rengas), Tengku Zafrul said the excise duty for affordable vehicles, especially cars below RM50,000, was low at between 2% and 5%, compared to rates of between 60% and 110% for luxury cars.

He explained that vehicle prices are not controlled by the government but influenced by market forces and associated costs, such as that of components and technology utilised, transport and logistics as well as insurance. “We hope that with technological advancements, car prices will drop along with higher demand in the future,” he added.

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