KUALA LUMPUR – A group of business and retailer associations have urged Putrajaya to withdraw its proposal to introduce a luxury goods tax, as tabled by Prime Minister Datuk Seri Anwar Ibrahim in his revised Budget 2023.
In a joint statement, the group said a luxury tax might make Malaysia non-competitive for tourists, deterring more arrivals, and risking investments from local shoppers.
“Malaysia has been positioning itself as a shopping haven, and policies have been promulgated over the past many decades to position Malaysia as a tax-free shopping destination.
“In 2018, 37.6% of tourists’ receipts, which translate to foreign exchange earnings in Malaysia, have been from shopping,” the groups said today, adding that the tax will see locals directing their spending overseas.
“This (luxury goods tax) is a lose-lose proposition: losing foreign tourist arrivals and losing Malaysians from buying locally, coupled with the loss of foreign exchange.”
The groups also said a luxury goods tax might encourage black market operations to thrive, noting that it was akin to “the same phenomenon of penalising duties and taxes on cigarettes and liquor”.
“The smuggling and black market activities are so prevalent that the government does not collect the intended quantum of taxes,” they said.
As such, the groups called on the government to “judiciously evaluate” the entire spectrum of taxes on wealth, capital gains and luxury items.
“(Luxury goods taxes) must not deter entrepreneurship and even drive enterprising individuals and companies to leave Malaysia to venture in other countries instead, thus contributing to the nation’s brain drain,” they said.
Suggesting instead that the government consider imposing a luxury tax on “only big-ticket ostentatious products” such as sports cars, racing motorbikes, yachts and aeroplanes, the groups also noted that the definition of luxury is “fraught with subjectivity”.
The statement is endorsed by a total of eight organisations, including the BBKLCC Tourism Association Kuala Lumpur, Malaysia Retailers Association, Bumiputra Retailers Association, Federation of Malaysia Business Associations, and the Malaysia Shopping Malls Association.
During the tabling of the Supply Bill 2023 in Parliament on February 24, Anwar said that the government will be taking a more progressive approach by expanding taxes for those who can afford it.
He said this is opposed to reintroducing broad, consumption-based taxes such as the goods and services tax, noting that among the luxury items to be taxed include luxury watches and expensive fashion items. – The Vibes, March 5, 2023
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