Oleh Maryam Zulkafly
The decision to delay the implementation of high value goods tax (HVGT), originally scheduled for May, has drawn mixed reactions from the public. While some view it as a prudent move to allow further engagement with industry stakeholders, others see it as a missed opportunity to address wealth inequality and bolster government revenue for social welfare programmes.
The postponement raises several pressing issues that warrant careful consideration. Firstly, it underscores concerns about the government’s commitment to bridge the wealth gap in Malaysia.
HVGT is intended to levy a tax on luxury items, targeting the affluent class and generating additional revenue for social assistance programmes.
It is intended to be imposed on big-ticket items such as private jets, jewellery and luxury cars. The delay, therefore, calls into question the government’s resolve to address wealth inequality and establish a more equitable tax framework.
The postponement may result in broader economic repercussions as it could impact revenue generation, fiscal sustainability and the government’s ability to combat systemic corruption and enhance governance.
Concerns have also been raised about the delay’s effects on businesses and the cost of living, with some perceiving the government’s cautious approach as stalling tactics that only benefit the affluent class.
It is essential for policymakers to address these concerns and expedite the process of HVGT implementation. Crucial steps such as stakeholder engagement, refining of tax structure aspects and promoting fiscal responsibility are among measures that should be considered by the authorities to ensure a successful and equitable implementation.
The definition and criteria of high value goods and the price range for taxable items need to be worked out immediately. The lack of clarity will only leave retailers and consumers in the lurch.
Specifics about the tax and the range of taxable goods have been scant, with only jewellery and watches explicitly mentioned so far.
The need for a comprehensive list is important to avoid confusion and draws attention to the complexity of setting the threshold.
For instance, in categorising jewellery, caution must be practised as not all jewellery purchases are made by the rich and wealthy. Jewellery is also bought for customary purposes such as gold for weddings or births.
It is not fair to include all jewellery as high value goods.
Gold is also sold as bullion or coins as investment. Therefore, it should have different tax treatment.
The government must remain vigilant in monitoring potential economic, social and political impacts and be prepared to make necessary adjustments to address evolving challenges.
The postponement also highlights the need for a balanced approach to tax reform in this country.
While engagement with stakeholders is important, the government must prioritise the timely implementation of HVGT to avoid prolonged delays that could undermine efforts to address wealth inequality and promote fiscal sustainability.
HVGT was intended to impose a 5% to 10% tax on luxury items, generating an additional RM700mil in annual revenue. The delay in implementing HVGT has been welcomed by Malaysia’s industry players and other stakeholders, who have called for a better tax system in the form of goods and services tax (GST).
The decision to refine certain matters related to the tax structure, especially the type of goods categorised as high value, threshold determination and tax rates, is a positive step towards ensuring a more comprehensive taxation system.
While HVGT is designed to augment government revenue and address economic challenges by targeting luxury goods and high-value assets, it is crucial to strike a balance between revenue generation and safeguarding the interests of consumers and luxury retailers and for favourable economic growth.
To ensure the successful and equitable implementation of HVGT, the government should provide educational programmes and support to promote prudent spending habits.
By addressing potential financial strains and fostering responsible consumption, the government can navigate the complexities of HVGT and its impact on society effectively.
It must be able to strike a delicate balance between improving the country’s fiscal position and avoiding placing undue burden on the people while maintaining the competitiveness of Malaysia’s own luxury goods market.
Overall, the implementation of HVGT is a complex issue that requires a well thought-out approach. Whatever new taxes the government wants to introduce must provide more room for it to enhance the rakyat’s well-being and social safety, not the other way round.