By Stephanie Jacob
As Malaysians are struggling to adjust to the impact of GST and the rising cost of living, a toll hike of up to 100% is another blow. What is the justification when Malaysian motorists probably pay among the highest tax rates in the world?
“You have got to be kidding me!” and “Are they mad?” – those were among the more printable reactions of many car-owning city dwellers when they found out that their daily commutes are going to be more expensive come Thursday, Oct 15.
Some 17 operators have announced they will increase toll rates anywhere from 20 sen to RM1.50, in some places that is as much as a 100% increase (see table). Government-owned PLUS is the only concessionaire to not jump on the bandwagon.
For Malaysians, the government’s decision to allow the concessionaires to hike prices smacks of a lack of empathy for the many who already have to stretch their ringgit to the maximum just to make ends meet. The fact that the announcement was made a mere three days before it is implemented did nothing to calm the anger.
Perhaps if there are alternative travel options, the increases might have been justified. But given the lack of a comprehensive public transport network, come Thursday, the many motorists using these roads will have no choice but to fork their money over.
The Works Ministry’s rationale for the hike is that there has not been one since 2008 and in lieu the government has had to compensate the concessionaires to the tune of RM1.5 billion.
Last year alone it had paid the highway operators RM403 million in compensation, the ministry said. A toll hike means the government can stop compensation and the savings can be put to better use, such as for resurfacing the roads and building schools and hospitals.
Effectively, the government has removed subsidies on toll fares leaving highway users to bear the full brunt. Which is in addition to the road tax that every car owner already pays, and not to mention the huge excise duties and other taxes for new cars which make the prices of cars in Malaysia among the highest in the world.
In 2013, the government collected RM7.31 billion in taxes from excise and import duties. Furthermore, there are about 24.6 million cars registered in Malaysia as of 2014. Even if we were to assume each of them paid RM70 in road tax, the government would have collected RM1.72 billion over the past years, making in all over RM9 billion – or 22 times the RM403 million the government paid in toll concessions.
So why not use some of what have been collected in taxes and duties to cover the compensation cost? Alternatively, reduce or even remove all the high taxes which come with owning a car, so that Malaysians are not hit with a double whammy.
At a time when the government expects the rakyat to tighten their belts, they should be willing to cut back on unnecessary expenses and work on limiting wastages in government-linked agencies. And if they want to remove subsidies, they must be prepared to remove unnecessary taxes too since we now have the goods and services tax (GST).
Furthermore, big ticket items such as the high-speed rail project for instance will eventually add on to the government debt and expenditure burden, as will 1Malaysia Development Bhd if it needs government bailout. And the government should be willing to seriously reconsider committing to them.
This episode also raises several other interesting questions, such as why is the government compensating the concessionaires? Why was the hike not staggered to reduce the impact on road users and why is the government not allowing the people to adjust to fiscal reforms before adding on new burdens?
First the compensation. Why does the government have to compensate these concessionaires in lieu of a toll rate hike? Are they making losses without it? Plainly put, the answer is no.
Tony Pua
Tony Pua, opposition member of parliament for Petaling Jaya Utara, pointed out today that even before the hike, most of these highway operators have been making profits over the past years.
Pua used Litrak Bhd which operates the Damansara-Puchong Highway (LDP) and SPRINT highway as an example. For financial year ending March 2015, Litrak made RM187 million in profit before tax on the back of RM380.7 million in revenue. This translated into more than 49 sen for every RM1 of toll paid going to Litrak’s bottom line.
In spite of this, LDP users will have to pay 50 sen more for the convenience of using the highway. Scarily for road users, Pua highlighted that based on Litrak’s concession contract, the LDP toll rate is due for another hike to RM3.10 from Jan 2016 (although an increase would have to get government approval).
So it is not that operators are not making money at the current fares. Rather it is the fact that the contracts allow the operators to hike rates as the concession period progresses. Most of the operators will continue to operate fine even without the hike albeit with lesser profits.
If you are looking for someone to blame then the inquest will surely lead back to the door of the government for negotiating such curious terms to begin with.
And while it is bad enough that rates are rising, the quantum of the increases makes things worse. The government has said it has been delaying a hike since 2008 to avoid burdening the rakyat.
Yet it seems to have no qualms of sanctioning a hike at a time when many Malaysians are feeling the pinch of GST. As many on social media pointed out, it is not as if many Malaysians are seeing their wages increase in tandem with prices.
A toll hike is the surest way to ensure that everything from your vegetables in the market to your teh tarik at the mamak will all cost more on Thursday. So why is it suddenly okay? Were the initial rate hikes delayed to win votes, maybe the recent hike has come because there are no general elections on the horizon?
These days, the government’s go-to explanation for any tax hike or subsidy removal is that it is necessary to raise the government’s income. It is true that subsidies cannot continue forever, that GST is necessary to widen the tax base, and fiscal reforms are necessary.
But the effect of these policy decisions coming one after another means multiple blows to the many people who are already finding it tough, especially when wages have not increased in tandem.
Given that most operators are running profits, could the government have not waited awhile to allow Malaysians to adjust to the impact of all the tough measures which have already been implemented
Malaysians are suffering because over the years the government has put of making tough decisions. Yet a government which prioritises votes over making unpopular but right decisions often end up causing more pain later on.
Plans to rationalise subsidies, implement GST and raise toll fares have been in place for years but were put off, partly because they were unpopular. Now the hits are coming in quick succession, and many are struggling to stay on their feet.
One cannot help but feel that we are paying the price for years of bad policies. This is made worse by the fact that many are not sure that this is a short-term pain for a long-term gain. For Malaysians, the tough times look set to continue.
At the very least, Malaysians should know exactly what are in these concession agreements. For example, how much does the government get if traffic projections are exceeded? The agreements should be made public so they know what they are paying for and how revenue is being divided. Simply telling Malaysians that it is time for a rate hike is insufficient, the government must justify it.
And also it will help to plan now for when concessions expire so that the burden on the public is reduced as construction costs would have long been recovered since, instead of waiting until the last minute, as with independent power producers where capacity is not being properly used on the expiry of the concession period.
GRRRRR!!!
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