Road Tax should be reduced, not increased

At a first glance, the Budget seems to a balanced one with emphasis on sustaining economic growth while at the same time, trying to contain inflation and to curtail excessive speculation on landed properties.

The most welcome news in this Budget is the reduction in personal income tax rates and the abolition and reduction of import duties of many items of goods and products.

However, to sustain growth, the Government has to find ways to raise revenues from other sources - like increasing levies on foreign labour, road tax, etc. In other words, if one is to pay less in income tax, one has to pay more for some other services - particularly for items of a luxurious nature.

This is a rebalancing exercise which may result in some taxpayers paying more. This rebalancing exercise seems to be an easy way out to maintain a balanced budget. However, the Government may be too enthusiastic about it by over taxing certain goods or services which are already taxed unreasonably high. One good example of this over taxation is the increase in road tax for vehicles exceeding 2,000cc.

The primary purpose of imposing road tax is to raise funds for the construction and maintenance of roads and highways. Many primary roads and highways in Malaysia have now been privatised. They are being built and maintained by selected private companies.

Tolls are collected from the road users to finance the construction and maintenance of these roads and highways, which include hefty profits for the private operators. This approach of privatisation has obviously lessened the Government's burden and responsibilities in providing part of the basic infrastructure for national development.

Therefore, if the objective of levying road tax is for this purpose, then the rates of road tax for vehicles should be reduced, instead of maintaining and increasing them. Already, toll charges are a significant part of car maintenance, the increase if road tax will further increase the burden of many road users. What more if the Government allows the highway operators to increase the toll rates? 2008