I refer to the letter Abolish duties for compact cars .

It is possible to understand why the writer, like many Malaysians, thinks that cars are a necessity, and I reckon that the poor state of our intra-city public transport has a lot to do with it. Private vehicles have become a necessity because of the low reliability, bad route planning and inadequate service provision of our public transport system.

Our commuters can testify to being late because of buses not operating as per published times. They can tell of the occasions when they had to take two buses and the LRT plus a 15-minute walk to get from point A to point B within the city. And then there is the all too common experience of having to stand so close to each other inside buses and train commuter carriages that there is hardly room to breathe.

Despite the high costs of owning a private vehicle and having to deal with the added problem of finding a parking space, the relative convenience and comfort that owning one means that it is value for money. Until recently, there had been no impetus for our myopic government to take the matter of improving public transport seriously.

Indeed, there was an incentive to encourage private vehicle ownership because the economy as a whole - and certain parties in particular - stood to gain from the increased car sales and construction of tolled roads to ease the congestion that ensued.

Now the rakyat has to literally pay the price for the failure of this myopic government to recognise the inevitable, ie. the day when petrol is no longer cheap, thus making gains from car sales and tolled roads unjustified by the burgeoning petrol subsidy bill. Who in Malaysia would have thought that the world oil price would almost quadruple over a period of three years? Not even the Fourth Floor mavericks by the looks of it.

I wholeheartedly agree with the writer that sandwiching a child on a motorcycle is very dangerous, but there is no evidence that a car is any safer than intra-city rail or bus travel. Ultimately, the reason for owning a private car even when one can hardly afford it is to avoid the unreliability, inconvenience and discomfort of public transport.

Really, the last thing Malaysia needs is more cheap cars on the road. The vicious circle of poor public transport leading to increased private vehicle use which further hampers efficient provision of public transport needs to be broken. One way to achieve this would be to allow petrol prices to float at real market prices. Unpopular as this may be, it is the bitter medicine that we need to do away with the false economy of subsidies which ultimately hampers development.

Some imported car owners argue that after being slapped with extortionate import and excise duties, they should have the privilege of purchasing subsidised petrol. Funny then that vehicle import and excise duties are equally high in Singapore where petrol is not subsidised; or petrol sales tax cost more than the price of petrol itself in the countries of Western Europe where import and excise duties are lower.

In these countries you have to be relatively well off to own a car, but at least the public transport system is more reliable and well-planned. Thus the logic that import and excise duties be used to subsidise petrol is warped at best – revenue from these duties should be invested in public transport instead.

Whilst the government has repeatedly made known their intention of investing the savings from the petrol subsidy bill in public transport, a portion of the money saved from abolishing subsidies should be channelled to raise the income of our lowest-paid workers to narrow the wealth gap. Even if three million workers get a RM300 a month salary hike, the resultant RM10.8 billion bill would still be far cheaper than footing the RM56 billion fuel subsidy bill, which in the first place benefits the largest petrol consumers the most.

One also wonders if more Malaysians would be willing to take up dirty, dangerous or difficult occupations if they were better paying. The World Bank's Migration and Remittances Report reveals that there were more than 1.6 million migrant workers in Malaysia in 2005 and outward remittance flows in 2006 totalled US$5.56 billion (RM20.4 billion at 2006 exchange rates) or 3.7% of GDP.

This translates to an average outward remittance of RM1,062 per migrant per month, though this figure is likely to be skewed upwards by under-reporting of the number of migrant workers and remittance of large sums by expatriate professionals. Nevertheless, if our workers were paid higher wages and migrant labour and talent limited only to jobs that are not filled by qualified Malaysian citizens, perhaps more wealth can be retained in the country.

The writer’s disagreement to reducing personal income tax seems to suggest that the writer had missed the concurrent suggestion of introducing Goods and Services Tax (GST, aka Value Added Tax/VAT) which, if introduced, would also apply to gold jewellery that the writer came across as being quite concerned about. I suggested that a reduction in earnings-based tax and an introduction of a consumption-based tax would be more equitable and transparent.

We are not a socialist state intent on punishing the rich with double, triple or stealth taxation – a disastrous recipe for encouraging capital flight. The GST/VAT system would make it less worthwhile to under-report revenue for tax-evasion purposes. I also want to suggest that a list of essential goods (gold jewellery excluded!) be exempt from GST/VAT to minimise its impact on the lower-income groups.

On a similar note, the writer’s objection to reducing corporate tax also suggests that the writer failed to make the connection between that and the proposal to increase the wages of workers employed by corporations.

If the petrol subsidy is abolished and the salary of civil servants increased as described earlier, then it is only fair to expect that private sector workers earning similar wages get an increase too. When labour costs go up, corporations will choose to relocate to cheaper locations if the costs of setting up new infrastructure and training new workers can be justified. Lowering the corporate tax solves this problem.

As corporations value efficiency and usually run at capacity, there is no reason to believe that rather than increasing the wages of existing workers, they would choose to hire more instead (drawing from the writer's analogy of hiring two maids instead of one). In fact, what unscrupulous corporations might do is to continue hiring the same number of workers while keeping wages stagnant and pocketing the extra profit from the lowered corporate tax.

This is where minimum wage legislation becomes useful. The government misses the point by thinking that minimum wages are about offering unreasonably high salaries which harm our competitiveness. In fact, it is what it says on the tin – a minimum wage law that ensures our workers a fair deal so that they are protected from unfair wage practices and exploitation.

I apologise for covering quite so much ground at once. The cardinal point is, if fuel subsidies are abolished, it is hoped that the government will do the right thing of putting real cash into the hands of those whom it will make the most difference. Resorting to petrol vouchers, fuel quotas and the like would only result in extra administrative effort, not to mention being subject to abuse and corruption similar to the subsidised diesel fiasco involving some of our fishermen.