Malaysia scraps plan to impose luxury goods tax

KUALA LUMPUR – The Malaysian government has decided not to proceed with its implementation of the proposed high-value goods tax, Prime Minister Anwar Ibrahim said.

He, however, said the underlying principle has been incorporated into the revised sales tax framework, with luxury and discretionary items now taxed at either 5 per cent or 10 per cent.

Datuk Seri Anwar further noted that the newly implemented low-value goods tax, effective from Jan 1, 2024, has brought in around RM500 million (S$151.5 million) in revenue in 2025.

He said the government’s latest review of the sales tax rate and expansion of the scope of the service tax, which came into effect on July 1, is expected to increase national revenue by RM5 billion in 2025 and double to RM10 billion in 2026.

In a written parliamentary reply on July 29, Mr Anwar, who is also the finance minister, said the ongoing diesel subsidy rationalisation has resulted in savings of up to RM600 million a month for the Malaysian federal government.

He added that other fiscal reform measures have contributed significantly to strengthening national revenue, including the implementation of the capital gains tax on unlisted shares, which took effect on March 1, 2024.

“Based on the current volume and value of transactions involving unlisted shares, the government estimates revenue collection at around RM800 million annually,” he said, adding that actual figures will be confirmed only after corporate taxpayers submit their annual income tax returns.

While a digital goods tax has not been introduced, a service tax on digital services has been in place since Jan 1, 2020, Mr Anwar said.

This tax, levied on digital service providers offering services or providing subscription services online or via other electronic networks, has generated RM1.6 billion in revenue so far in 2024, he added. THE STAR/ASIA NEWS NETWORK