As part of efforts to boost revenue and promote equitable taxation, the federal government has proposed a 3% tax on vehicles with engine capacities of 1800cc and above in the 2025-2026 federal budget.
According to the budget documents presented in parliament, the new tax is aimed at wealthier segments of society who can afford larger vehicles. Officials say the measure is part of a broader push to increase progressive taxation and generate funds for key sectors such as health, education, and infrastructure.
The tax will apply to both locally assembled and imported vehicles exceeding the 1800cc engine threshold. It is expected to have a significant impact on luxury and high-performance car sales, including popular models in the SUV and executive sedan categories.
Industry analysts have noted that while the tax may not heavily affect high-income buyers, it could influence overall vehicle import volumes and market pricing trends.
Automotive dealers have expressed mixed reactions—some welcoming the policy as fair, while others warn it may reduce sales and impact auto industry growth.
The proposal is currently under parliamentary review and could be adjusted before the final approval of the national budget later this month.
