MY's luxury goods tax will not be an alternative to GST, says deputy finance minister

Malaysia’s deputy finance minister Steven Sim Chee Keong has said that the luxury goods tax announced in Budget 2023 will not be an alternative to the country’s goods and service tax (GST), according to Bernama who were reporting from parliament where Sim was speaking. 

He added that the ministry will refine the tax system and study several aspects of it such as the tax structure and the rate to be imposed. 

He added that the ministry is studying the country's system to determine if they intend to introduce a new tax or widen the scope of its existing tax system. He was speaking during the debate on the Supply Bill 2023 in Dewan Negara, according to Bernama.

Due to the rising cost of living and economic uncertainty, Sim pointed out that it is not a timely juncture to reintroduce the GST.

Don't miss: MY's luxury goods tax will not affect its tourists, according to its deputy finance minister

In fact, Budget 2023’s clause on luxury tax aims at providing more support to citizens in the low-income bracket who were hit hard by the pandemic and saw an almost 50% drop in their incomes, Sim said. With an extended tax revenue collection, the progressive taxation system has the potential to provide funds for those who need it, he continued. 

Minister Sim added that the budget will aid not only citizens but also micro, small and medium enterprises.

His comments come after an uproar following PM Anwar Ibrahim’s decision to increase the country's luxury tax in his budget plans, a move which received significant pushback from retailers.

Retail companies protested the government’s decision to tax luxury goods, citing that it will discourage tourists from visiting the country. In an attempt to dissuade the luxury tax from being approved, retail associations galvanised to provide a joint statement against it. 

Not only did retail associations raise their voice against the luxury tax but so did Malaysian Association of Tours and Travel Agents (MATTA). In February, it stated its hope for a more tourism-friendly budget with better incentives and funding that would help industry stakeholders. It also offered a budget proposal for an attractive tax relief to be provided to encourage individuals to travel domestically.

“The budget may need improvements with special emphasis and incentives on tourism products and infrastructure to ensure that the Malaysian tourism industry retains its cutting edge in the long term,” added Datuk Tan Kok Liang, MATTA's president. 

Minister Sim responded at the time stating that Malaysia's luxury goods tax will not affect its tourism sector because tourists do not come to Malaysia with the specific goal to shop for luxury goods, but rather, that they travel to the country to visit its tourist destinations and national heritage sites as well as to buy its local handicrafts, according to media reports.

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