PETALING JAYA: The slew of tax hikes rolling out this year may dent consumers’ purchasing power.
Experts have also called for more clarity on the government’s position on taxing the previously untaxed logistics sector.
Tax expert Datuk Koong Lin Long said the two percentage points hike in several taxes would definitely see individual expenses increasing.
The service tax for some services will be raised from 6% to 8% in March.
“But I don’t think it will have much effect if you don’t spend so much,” he added.
Koong said the two percentage points increase mainly affects services and noted that there isn’t any increase in sales tax.
“These are services such as karaoke, among others. Do you karaoke every day? No. Do you use legal services or professional accounting or architecture services every day? No,” Koong pointed out.
However, he is concerned that subjecting the previously untaxed logistics sector to a service tax could see us paying more for goods.
“It has to be clear that it is not the price of goods that will increase but the transportation charges.
“Hopefully, they will not pass this small fraction of an increase to the consumer. Anyhow, this is a free market,” added Koong.
Thenesh Kannaa, executive director of tax advisory firm TraTax Sdn Bhd, said the 10% tax for low-value goods (LVG) will not affect consumers buying from physical stores.
“Those consumers who have been purchasing locally from brick and mortar stores or even shopping online from local vendors, won’t be impacted by the low value goods tax,” he said.
“Even if you use a foreign online platform but you’re purchasing a batik shirt from a vendor in, say, Terengganu, and having it delivered to your doorstep in Kuala Lumpur, you are not going to be impacted by the LVG tax.
“Only if you’re buying from overseas inventory will the LVG tax come into play, and that is the rightful policy so there is a level playing field,” he added.
He said more clarity is needed about the implementation of taxes on logistics services, which could have a major impact on product prices, if it comes into effect.
“Even though logistics is given a lower rate of 6% compared with 8%, that could still be significant for product prices,” he said.
This is because logistics services are present at every stage of the supply chain, right from the raw materials until a finished product is purchased by the consumer.
“Anything you buy from a supermarket has a logistics component to its product costing, for example,” he said.
“Storage could also be a part of the logistics supply chain.
Even though it is 6% and not 8%, it’s significant. Remember, it is 0% to 6%. It is a sizeable change,” he added.
Thenesh said businesses must also be mindful of the transitional issues that may erupt when the new tax rate (or new taxes) comes into effect in March.
“For example, what happens if you have collected the payment now but then the services are to be delivered post March 1,” he said.
“And the reverse, what if you have performed the service and invoiced now, and then it becomes accounts receivables and the receipt is issued after March 1?”
All these issues should be carefully thought about and should not be taken for granted, he said.
Businesses, regardless of size, must be mindful of these transitional issues and be aware of the law and guidelines.
On Nov 2, Prime Minister Datuk Seri Anwar Ibrahim was reported to have said that the government will refine the inclusion of the logistics sector in the taxable category, while not ruling out the possibility of granting exemptions to certain subsectors if it is found to directly affect the public’s interests.
Anwar, who is also the Finance Minister, also instructed the finance Ministry to conduct engagement sessions with stakeholders, particularly in the logistics sector, to get feedback before implementing the tax.
