Malaysia to delay new taxes as manufacturers fear US tariff hit

KUALA LUMPUR – Malaysia is delaying a planned expansion of its sales and service tax, providing a temporary reprieve for manufacturers braced for higher US tariffs.

The planned widening of the tax base, originally due on May 1, will be implemented at a later date, a spokesman from the Ministry of Finance said in a text message, confirming a report by the Edge Malaysia.

Malaysian manufacturers have been urging the government to refrain from introducing additional tax burdens this year after the US threatened a 24 per cent tariff on the South-east Asian country. The sector, a major contributor to the nation’s tax revenue, is under severe cost pressure, Datuk Soh Thian Lai, president of the Federation of Malaysian Manufacturers, said earlier in April.

The delay in the move “will provide some relief for businesses already grappling with the uncertainty caused by US tariff policy,” said Mr Khoon Goh, head of Asia research at Australia & New Zealand Banking Group.

“While this means that the additional tax revenue from the SST expansion will be put off, the bigger concern at present is the growth impact rather than the government’s finances.” 

Malaysia’s ringgit rose 0.7 per cent against the dollar to its strongest level since October as of 11.15am in Kuala Lumpur, the best performer among Asian currencies after the Thai baht.

Malaysia is seeking to negotiate a deal with Washington within the 90-day pause on the higher tariffs mandated by President Donald Trump, who has in the meantime imposed a 10 per cent levy on goods from Malaysia and many other trading partners. The government is currently reviewing its official growth projection of 4.5 per cent to 5.5 per cent for 2025, with the US levies causing uncertainty for investment and trade.

The finance ministry’s engagement with industries across the country to finalise the scope of the expansion and the applicable tax rates has been completed, the spokesman said. The guidelines and scope are being refined to ensure smooth implementation, they said.

The tax changes will be gazetted on June 1, director-general Anis Rizana Mohd Zainudin of the Royal Malaysian Customs Department, responsible for the execution and enforcement of the sales and service tax, was quoted as saying by the Edge. It was originally scheduled for the first quarter.

Prime Minister Anwar Ibrahim said in October, when he unveiled the nation’s budget, that the sales and service tax will apply to non-essential items, including premium imported goods such as salmon and avocado. It will also be widened to cover commercial services. BLOOMBERG.