Status symbol: A Rolls-Royce car is a good example of what represents a big boy’s toy
PETALING JAYA: Only the purchase of big-ticket items like flashy cars, private jets and yachts should come under the luxury goods tax and not fashion items, say high-end retailers.
Calling for careful planning and execution, they said the government should have special mechanisms in place so as to not deter tourists.
Malaysia Shopping Malls Association president Tan Sri Teo Chiang Kok said that in the spirit of taxing the rich, “luxury” should involve big-ticket items instead of goods favoured by tourists.
“It should be possible to tax the toys of the super-rich, such as luxury cars, private jets, boats and other generally ostentatious big boy toys,” he told The Star.
Teo also said that the classification of “luxury goods” based only on price point would be too simplistic, as values differ for different goods, materials and specifications apart from brands.
He suggested that a special mechanism be introduced for tourists to reclaim all taxes before they leave the country.
On Feb 24, Prime Minister Datuk Seri Anwar Ibrahim announced during his revised Budget 2023 speech that a luxury goods tax would be implemented on branded items starting this year.
Subsequently, Deputy Finance Minister Steven Sim said the ministry was working on the tax structure.
Suria KLCC Sdn Bhd executive director and chief executive officer Andrew Brien said Malaysia could explore the possibility of implementing tax-free measures for tourists, so that it would remain competitive in the tourism sector.
“Such measures will encourage high-end foreign tourists to extend their stay and spend more in various areas, including hotels, tours and food and beverage, thus contributing to the growth of the industry,” he said.
Kuala Lumpur Pavilion Sdn Bhd retail chief executive officer Datuk Joyce Yap concurred, saying that the tax would have an impact on shopping malls that cater to high-end consumers.
“The tax will make us less competitive in comparison to our neighbours. Furthermore, it will make Malaysia a much more expensive tourist destination.
“This move may also encourage Malaysians to re-direct their spending on luxury items to foreign markets, particularly Europe,” she said.
Agreeing that the tax would generate additional revenue from non-essential items, Yap said the amount would vary depending on the tax rate, the type of goods being taxed and consumer behaviour.
“The impact of the luxury goods tax on Malaysia’s luxury retail industry will be determined by a number of factors, and the effects will take time to manifest.
“It has the potential to generate significant revenue for government initiatives and reduce inequality, but it may also have a negative impact on the luxury goods industry and result in job losses.
“To avoid deleterious economic consequences, the implementation must be fair,” she added.
In a joint statement, several retailers and business groups also urged for a rethink of the tax, saying that “a single price point cannot be a determinant for value or luxury.”
If the economic philosophy is to tax the rich, they said only big-ticket ostentatious products should meet this criterion, such as sports cars, racing motorcycles, yachts and airplanes.
“Our tax policy should not deter and punish success due to entrepreneurship and risk-taking to nurture start-ups and business formation.
“A holistic view should be taken to balance between risk and reward and the flow-through multiplier effect of business activities that contribute to the economic growth of the nation.”
They said the government should evaluate the entire spectrum of wealth tax, capital gains tax and luxury tax to ensure such taxes do not deter entrepreneurship and drive enterprising individuals and companies to leave Malaysia and venture to other countries instead.
The statement was issued by BBKLCC Tourism Association Kuala Lumpur, Batu Road Retailers Association, Bumiputra Retailers Organisation, Federation of Malaysia Business Associations, Industries Unite, Malaysia Retailers Association, Malaysia Retail Chain Association and Malaysia Shopping Malls Association.
