Tuesday, December 4, 2012

Can we live on cheap petrol forever?

The more we are talking about taxing the rich to subsidize the poor, the rich get richer and the poor are rapidly getting poorer. The more we are discussing about increasing the standard living of the poor, the cost of living are shooting up. The more we are condemning the opposition, the more they received support.

In the case of phased out gradually the petrol subsidy, the more we talk, the longer period of time we needed. Can the cut in petrol subsidy solve the financial problem facing by the government? Can it solve the highlighted problem without affecting the poor? This is why the sound governance policy is very much needed in determining the degree of support.

Former Finance Minister Tengku Razaleigh Hamzah argues that the best viable strategy that could solve the problem related to cutting petrol subsidy is through the introduction of a higher road tax for owners of cars with large engine capacities.

Describing the petrol subsidy as a “drag on government finances” and also an obstacle to the proper allocation of resources, Tengku Razaleigh said: “We cannot live on cheap petrol forever. We can seek ways to transition into subsidy removal,” he said.

He suggested that owners of bigger cars should be made to pay a higher road tax to “proxy subsidy removal” for their cars.

“In order to protect the average consumer, perhaps we can begin by applying an implicit subsidy cut on larger engine capacity vehicle owners via a higher road tax,” he said.

“At the appropriate time, the petrol subsidies themselves should gradually be removed,” he said.

However, without addressing the viability issue of the poor, can the poor benefit from phased out gradually the petrol subsidy?

The question remains: Can the applying an implicit subsidy cut on larger engine capacity vehicle owners via a higher road tax strategy benefiting the poor?

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