KUALA LUMPUR, Nov 21 — Deputy Finance Minister II Steven Sim has reportedly defended the government’s plan to introduce a High-Value Goods Tax (HVGT) for luxury items by next year.
He told Free Malaysia Today (FMT) that based on the HVGT, those who can afford such luxury goods will have to give something back to the country.
“If you are able to make more money in this country, if you are able and can afford to spend RM20,000 on a handbag or RM50,000 on a watch, then we want you to contribute a bit more back to the country,” Sim was quoted saying.
In the report, Sim said that while the government had the option of other forms of taxation, it did not want to introduce a tax that would burden the lower-income groups.
The Bukit Mertajam MP also made it clear that the HVGT is a consumption tax that is imposed when one spends more money.
“When you do not buy [luxury items], you don’t get taxed. But when you buy something expensive then you contribute a bit more,” he reportedly said.
Sim said that the government is aware of the concerns surrounding the HVGT and it is engaging stakeholders before announcing plans for the tax.
He explained that the decision to exempt tourists from the tax was made based on feedback that they may choose to shop in other countries if they are subject to the tax.
“This will discourage tourists from visiting Malaysia and therefore, the tax department agreed (to not tax tourists) to prevent impacting the tourism industry,” he told FMT.
Sim added that the government is also trying to address concerns of different sectors, including adjusting the threshold for the imposition of the HVGT on goods that are also purchased by those from the lower and middle-income groups.
He said that the tax will not target any specific brands and will be carried out according to the category of items such as handbags, jewellery and watches, with a price threshold for each category.
On how much money the government aims to collect from the HVGT, Sim said they have yet to finalise a figure.
“It’s a new tax. We are still working on the quantum to charge and the categories of items,” he was quoted saying.
Prime Minister Datuk Seri Anwar Ibrahim recently said the HVGT, previously called Luxury Goods tAx, will kick in starting from May 1 next year.
During the tabling of Budget 2024 in October, Anwar proposed that the HVGT for luxury items would be at the rate of between 5 and 10 per cent.
This proposal was met with scepticism from former prime minister Datuk Seri Ismail Sabri Yaakob, who warned that the luxury tax could potentially discourage foreign tourists from visiting Malaysia for shopping purposes.