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where is that fuel subsidy?

The Malay Mail Online – Tue, Oct 14, 2014

So, tell me again, where is that fuel subsidy from the government that everyone is talking about?

You buy a car, below 1,800cc like most people, because that is all you can afford. Let’s say it rolls out the factory gates priced at RM40,000.
At that price, a fair profit has already been made by the factory, sufficient to pay for its factory rental, equipment amortisation, suppliers, employees’ wages, etc. All fair enough.

The government has been kind enough to do away with import duty from Asean nations, in the spirit of cooperation and all that. It now takes just 75 per cent in excise duty on your sub-1,800cc car. That’s RM30,000.
Don’t take my word for it, see it for yourself here.
So, it reaches the distributor at a cost of RM70,000 plus transport and miscellaneous charges. The distributor, and the dealer down the line, have to make a profit to cover their costs, simply because they are in business to make a profit. Fair enough.

Say, they mark up 15 per cent of RM70,000, which brings the price to RM80,500.
The taxman is not done yet. He takes a further 10 per cent in sales tax. That’s RM8,050, which pushes the price to RM88,550.
When you pay RM88,550, remember that RM38,050 (that’s roughly 43 per cent) of the car’s price is already in the government’s pocket.

Then you drive for the next 15 years. Car companies calculate warranties based on an average annual usage of 20,000km. So, you drive 300,000km.
At an average of 8L/100km (a decent, not so great, not too bad fuel consumption for a 1,800cc car), you burn up 24,000L in 15 years.
Now, the government already has 3,805,000 sen of your hard-earned money (which has been already income-taxed, by the way).

Forget about complex compound interests and overnight rates the government can earn from holding your money over 15 years, that amount can subsidise your 24,000L of fuel at 158.54 sen per litre.

Now, I quote from The Star Wednesday August 20, 2014, that is, before the latest round of oil price drops and subsidy rationalisation: “As of July 2014, the actual price of RON95 petrol was RM2.85 and diesel RM2.71. The flat rate subsidies of 75 sen per litre for RON95 and 71 sen per litre for diesel are extended to all private and commercial vehicles.”

You earn an income, you pay income tax. That pays for the country’s services to you. You pay road tax to use the roads. You pay toll to use some other roads. You pay sales tax to pay for the government’s expenses. You pay excise tax some more ... For what?
So, remind me again, where is the “fuel subsidy by the government” that everyone is talking about?
It looks like we are subsidising the government after all.

* Paul Si is a reader of Malay Mail Online residing in Kuching, Sarawak. He previously worked as a journalist who also covered the local motoring industry.