In January, it was confirmed by the Malaysian Automotive Association (MAA) that government had provided a deferment for the implementation of the Excise (Determination of Value of Locally Manufactured Goods for the Purpose of Levying Excise Duty) Regulations 2019, which expired on December 31, 2024 and was imagined to take effect in January.
Had that stay (which is the most recent of many) not been given, the regulations – also often known as the open market value (OMV) or ‘402’ excise duty revision – would have seen seen prices of CKD locally-assembled vehicles go up by as much as 30% as of this 12 months, which might obviously not have been excellent news for all concerned, automotive industry and buyers alike.
The reprieve isn’t for long though, since it was also revealed that the deferment is just for an additional 12 months, which suggests it runs out on December 31, 2025, and the brand new ruling is ready to be implemented by January 2026.
It’s obvious that the move may have detrimental effects on the entire automotive eco-system, with the MAA already having voiced its concern in regards to the OMV revision, and the Malaysia Automotive Component Parts Manufacturers (MACPMA) and the Motorcycle and Scooter Assemblers and Distributors Association of Malaysia (MASAAM) also stating their apprehension in regards to the matter.
The prevailing sentiment is echoed by the Malaysian Motorcycle and Scooter Dealers Association (MMSDA), which said that manufacturers would struggle to soak up the upper duties that may inevitably come about should the OMV revision occur, and that there can be a cascading effect from that.
In line with association chairman Datuk Wee Hong, motorcycle dealers would thus should adjust their prices in accordance with the manufacturers’ pricing adjustments.
“As motorcycle dealers, our business principle relies on the associated fee price of products. Buying at the next price means selling at the next price. If manufacturers state that the implementation of OMV will impact motorcycle prices, with an estimated increase of 10% to twenty%, then motorcycle dealers may have to regulate prices accordingly,” he said in a written reply to paultan.org‘s questions on the matter.
He added that the impact of a price increase would affect smaller capability locally assembled motorcycles essentially the most, and with that, its buyers. “Most buyers of kapcai or motorcycles below 150 cc belong to the B40 income group, who depend on these motorcycles as their essential technique of livelihood. A price increase would undoubtedly add to their financial burden,” he stated.
Wee said the MMSDA is firmly on the identical page with other industry associations on the matter. “We’re willing to collaborate with stakeholders within the motorcycle industry to induce the federal government to review its decision to not further extend OMV 402 with a view to maintain price stability and avoid negatively impacting the B40 community. This can even help prevent disruptions to the growing gig economy,” he said.
Nonetheless, the association is preparing contingency plans should the brand new OMV come into place. “Dealers will monitor market demand and changes while adjusting the services and offers provided to customers — reminiscent of complimentary helmets, raincoats and other advantages — to mitigate the adversarial effects of price increases in the marketplace.” he explained.
The controversial ‘402’ – gazetted on the last day of 2019 – stipulated a brand new methodology of calculating a CKD vehicle’s open market value (OMV), which influences how much tax is to be paid and due to this fact, its selling price.
Under the revision, OMV – which is defined as the ultimate market value of a CKD vehicle ex-factory before the federal government imposes excise duties on it – is ready to incorporate not only the profit and general expenses incurred or accounted within the manufacture of a vehicle, but in addition of its sale, the latter being where the contention is currently centred.
The regulations were imagined to come into force in 2020, but 22 days into that pandemic 12 months, MAA announced that the finance ministry had deferred implementation to 2021. By end-2020, it was deferred again, and MAA appealed to the federal government in 2022 for continued deferment. This was successful, with a two-year deferment being granted until December 31, 2024. The present deferment is until December 31, 2025.
While the federal government undoubtedly wants to extend its coffers, introducing the brand new OMV might be not the most effective approach to go about it, because it will not only affect the competitiveness of the local automotive market but ultimately burden consumers. Indeed, given the numerous reprieves which have surfaced, it’s obvious that only a few people think the brand new calculation methodology is idea.
Such a blanket move would also go against the present government’s “tax the wealthy” approach of late, and so perhaps the High Value Goods Tax (HVGT) – which has been placed on hold – must be revisited if recent tax streams are being checked out.
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This Article First Appeared At paultan.org
