Tax incentive extension needed to drive car sales

Apart from the extension of sales tax exemptions, a continuation of moratorium would also have a positive impact, says expert

pic by TMR FILE

AN EXTENSION of the sales tax exemptions for the automotive industry is needed as it would sustain the momentum of car trade in the country until next year.

The Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said the continuation of the tax incentives, should it be part of the Budget 2021 provisions, would help boost the sales volume amid the current sluggish consumer spending.

“Consumers are now cautious and not going out as much. We hope for the sales tax exemption for another six months,” Aishah told The Malaysian Reserve (TMR).

She said apart from the extension of sales tax exemptions, a continuation of the loan repayment moratorium would also have a positive impact on the automotive industry. Regardless, she said the association did not submit any document on recommendations or budget wish list this year as it used to in previous years.

Consumers are now cautious and not going out as much. We hope for the sales tax exemption for another 6 months, says Aishah – pic by Muhd Amin Naharul

She said input from MAA members were sought by the Finance Ministry in the preparation of Budget 2021.

The tax incentives — which provide sales tax exemptions of 100% for locally assembled vehicles and 50% for imported units effective from June 15 to Dec 31 — have helped reduce car prices largely between 3% and 6%.

Pakatan Harapan (PH) had recently outlined six key recommendations for a so-called “Unity Budget 2021”, including an extension of the loan moratorium until March 31 next year.

PH also proposed an expansion of the social safety net and welfare payments for the vulnerable and unemployed by increasing the monthly welfare aid to RM1,000 until the end of the Covid-19 crisis, among others.

Kenanga Research analyst Wan Mustaqim Wan Ab Aziz concurred with Aishah that an extension of the sales tax exemptions and loan moratorium would be positive for the automotive industry to boost consumer expenditure.

He also said the withdrawal of money from Account 1 of the Employees Provident Fund, as recommended by many quarters, would drive consumer spending.

“Consumers remain cautious with the end of the loan moratorium and retrenchment exercises by certain companies that are negatively affected by the pandemic lockdown,” Wan Mustaqim told TMR.

Vehicle sales in Malaysia jumped 26% to 56,444 vehicles in September this year from 44,666 units in the same month last year, according to MAA data.

Sales of passenger vehicles climbed to 51,422 units in September 2020 from 40,267 in September 2019, while sales of commercial vehicles also increased to 5,022 from 4,399.

On a month-on-month basis, sales volume for September rose 7% from August 2020.

MAA anticipated that sales volume in October may be lower than that in September due to the implementation of the Conditional Movement Control Order and cautious consumer spending following the end of the loan moratorium on Sept 30.