In a recent statement, economist Geoffrey Williams from Malaysia University of Science and Technology proposed that private electric vehicles (EVs) should be subject to taxation rather than enjoying tax incentives. His rationale is rooted in the perception that private EVs can be considered luxury goods due to their high purchase and maintenance costs, making them accessible primarily to wealthier families.
Williams argued that providing tax incentives for private EVs might not have a significant societal impact. He pointed out that EVs, much like other luxury items, are often additional vehicles within a household that already possesses traditional petrol or diesel cars.
According to a Bernama report, the government of Malaysia has set an ambitious target of having 1.5 million EVs on its roads by 2040, a significant increase from the previous goal of 90,000 units.
The shift towards EVs is part of a global trend away from internal combustion engine vehicles, as noted by Malaysia’s Minister of Natural Resources, Environment, and Climate Change, Nik Nazmi Nik Ahmad.
To promote the adoption of EVs, the 2023 budget included an excise duty and sales tax exemption for locally assembled EVs until December 31, 2027, while the exemption for imported EVs was extended until December 31, 2025. Additionally, EVs are exempt from road tax until the end of 2025.
In the 2024 budget, Prime Minister Anwar Ibrahim introduced a scheme to encourage individuals earning up to RM120,000 annually to purchase electric motorcycles, with potential rebates of up to RM2,500.
Yeah Kim Leng, an expert from Sunway University, highlighted that the tax exemptions for EVs are part of the government’s broader initiative to transition to a green economy with net-zero carbon emissions. These incentives are designed to accelerate the shift toward EVs, attract foreign direct investment, and bolster the entire EV supply chain, including battery manufacturing. Kim Leng stressed that taxing EVs would run counter to Malaysia’s long-term goal of embracing green energy, promoting electrification, and reducing its carbon footprint.
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