Govt lost out on RM4.89b in excise duty on CKD cars from 2015 to 2017

This article first appeared in The Edge Financial Daily, on July 16, 2019.
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KUALA LUMPUR: The government lost out RM4.89 billion in excise duty on completely-knocked-down (CKD) vehicles from 2015 to 2017, due to the various types of exemptions granted — including for state assemblymen, members of Parliament, embassies and the government.

Such exemptions were also extended to the Returning Expert Programme and the Malaysia My Second Home Programme, according to the findings of the federal ministries/departments section under the Auditor-General’s Report 2018 Series 1.

There were also exemptions given via special approval from the ministry of finance, and excise duty exemptions for energy-efficient vehicles (EEVs).

During this period, 100% excise duty exemption was approved for 73,250 units of CKD vehicles.

From the RM4.89 billion tally, the excise duty exemptions granted to three states alone — namely Pahang, Kedah and Selangor — came up to RM4.095 billion (83.75%).

The report also noted that the bulk of the excise duty exemption is for EEVs and fleet management service provider Spanco Sdn Bhd’s vehicles, which covered RM3.862 billion (94.3%) of all approved exemptions.

“In the opinion of the audit, the rating of EEVs by the Road Transport Department is based on the definition of UN R101, which has not been fully adopted, especially in relation to carbon emissions,” said the report.

Hence, it is of the opinion that the 100% exemption in excise duty on manufacturers’ application needs to be reviewed.

This is so that excise duty exclusions will not affect the collection of state revenue and, concurrently, ensure the success of the National Automotive Policy 2014.