Gov't lost out on RM4.89 bil in excise duty on locally-assembled vehicles from 2015 to 2017 – AG's report

The Auditor-General’s Report 2018 Series 1 has revealed that from 2015 to 2017, the government provided RM4.89 billion worth of excise duty exemptions to locally-assembled (CKD) vehicles, The Edge reports.

Various excise duty exemption incentives were granted by the government during the period, and included that for state assemblymen, members of Parliament, embassies and the government as well as for the Returning Expert Programme (REP) and Malaysia My Second Home (MM2H) programmes.

There were also exemptions given via special approval from the ministry of finance (MoF) and the exemption of excise duties for energy efficient vehicles (EEVs), which was introduced under the National Automotive Policy (NAP) in 2014 to provide incentives for fuel-efficient, hybrid and electric vehicles.

The report stated that from 2015 to 2017 a total of 73,250 units of CKD vehicles were given excise duty exemptions of up to 100%, amounting to RM4.89 billion. The percentage of exemption listed in the AG’s report was clarified by the MoF in a written response in January this year, in which the ministry explained that while EEVs covered EVs, hybrids and petrol/diesel vehicles, the 100% exemption of import and excise duties were only considered for EVs and hybrids.

For petrol/diesel vehicles that obtained EEV certification, the level of import/excise duty exemptions were considered based on a cost-benefit analysis and were approved by the ministry after deliberation by the Automotive Business Development Committee (ABDC).

Three states were sampled in the audit, and these were Pahang, Kedah and Selangor, all of which accomodate vehicle assembly facilities. From that RM4.89 billion worth of total excise duty exemption, the report indicated that the exemption that was approved in these three states amounted to RM4.095 billion, or 83.75% of the total.

The bulk of the excise duty exemption was for EEVs and fleet management service provider SPANCO’s vehicles, and these totaled RM3.862 billion, or 94.3%, of all approved exemptions during the three-year timeframe.

It was the opinion of the audit that the rating of EEVs by the road transport department (JPJ), which is based on UN R101 regulations that were not complete – especially in relation to carbon emissions – but nonetheless allowed the 100% exemption in excise duty, needed to be reviewed. This is to ensure that excise duty exclusions will not affect the collection of state revenue and, concurrently, ensure the success of the NAP.

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