The 10% sales tax on all online sales for low value goods(LVG) below RM500 should be waived until after the expected recession next year. The government had passed the Sales Tax (Amendment) Bill 2022 in Parliament earlier this month, to impose a flat 10% sales tax by 1 January 2023 on LVG below RM500 purchased online from foreign suppliers and delivered to Malaysia. The government expects to earn an additional RM200 million in revenue.
Currently, low-valued goods priced RM500 and below are not subject to any tax when they are imported to Malaysia. This, however, has caused unfair treatment to local traders as locally-produced LVG below RM500 are subject to sales tax as well as abused by dishonest foreign suppliers, who declare high value goods as low value ones worth RM500 and below to avoid being taxed.
Whilst there is a need to create a level-playing field by imposing the same tax on foreign suppliers imposed on local suppliers, the government should have instead waived the 10% online sales tax for local suppliers for LVG below RM500. Many purchases of online low value goods below RM500 are made by the lower-income groups.
In other words, the additional RM200 million in revenue for online LVG foreign purchases, and unspecified hundreds of millions of ringgit more collected from online LVG domestic purchases, will be borne by the low-income groups. The government should be reducing their tax burden instead of increasing them during times of imminent recession and soaring prices.
Whilst it is the government’s intention to create a level-playing field for domestic online suppliers who are now imposed the 10% sales tax on LVG but not foreign online suppliers, a judicious approach would be to waive the sales tax on all LVG for both foreign and domestic suppliers until the coming recession is over. The government should not miss the woods from the trees so that creating a level-playing field should not be at the expense of consumers, primarily the low-income earners who can only afford to purchase the LVG below RM500.
DAP and PH MPs had opposed this new 10% sales tax in Parliament on online purchases of LVG below RM500 from foreign suppliers and even proposed that the existing 10% sales tax from domestic suppliers for online purchases of LVG below RM500 be waived until the threat of an expected recession is over. The threat of a global recession is real as can be seen from the performance of the US economy which is currently in technical recession over the first two quarters of 2022 and the Bank of England’s prediction the United Kingdom will be in recession in the final quarter of 2022.
There is no doubt that additional taxes will not help to generate economic growth to overcome the expected recession. And yet, the government in its self-absorption with politicking, continues to express optimism that Malaysia can achieve the 2022 projected economic growth of up to 6.3%. Even the International Monetary Fund had lowered its growth target of Malaysia to at best 5.6% for 2022.
Malaysians do not need new taxes nor any increases in interest rate when pressing economic issues resulting in high cost of living, ranging from soaring prices of food and materials, a severe labour shortage and a rapidly depreciating ringgit remain unresolved.