KUALA LUMPUR: The new and revised taxes under 2024 Budget can raise the cost of doing business, leading to a cascading effect that could result in price increases throughout the supply chain, industry experts warn.
They highlighted that a more in-depth study and right implementation tools is needed.
During the tabling of 2024 Budget, Prime Minister Anwar Ibrahim said the Sales and Service Tax (SST) rate would be raised to eight per cent from six per cent currently.
The government will enforce the implementation of capital gains tax (CGT) for the disposal of unlisted shares by local companies based on net gains at a rate of 10 per cent from March 1.
The government will also enact new legislation to implement a high-value goods tax at a rate of five to 10 per cent on certain luxury items such as jewelry and watches, based on the threshold value of the goods.
While the two per cent increase in SST is expected to boost revenue, tax experts said it may not have a significant impact, especially with exceptions for essential services like food and telecommunications.
Additionally, they caution that an increase in service tax can initially raise the cost of doing business, potentially leading to a cascading effect that could result in price increases throughout the supply chain.
"The 2024 Budget's tax adjustments aim to strike a balance between government revenue and the well-being of the Malaysian public.
"As these changes come into effect, businesses and individuals alike will adapt to the evolving tax landscape and its economic repercussions," Deloitte Malaysia indirect tax leader Tan Eng Yew told Business Times today.
Echoing the view, Financial Planning Association of Malaysia president Alvin Tan voiced concerns about the potential impact of the tax adjustment on rising logistics costs for businesses and consumers.
He suggests that the potential increase in logistics expenses may compel businesses, particularly in the retail sectors, to adjust their prices.
"As a result, overall inflation could see an uptick, with businesses passing on these additional logistics costs to end consumers, potentially impacting the cost of everyday goods," he said.
Harvey & Associates managing partner Harvindar Singh said the new adjustment on SST is expected to generate an additional RM9-10 billion in revenue for the government.
However, Harvindar said it is poised to increase costs for service providers, potentially affecting businesses and consultants across the nation.
On the luxury goods taxes, he said the government is expected to collect about RM840 million from it.
"Important to note that earlier this year, the reduction of tax rate for B40 and M40 groups resulted in the loss of revenue to the government of RM900 million. So this will sort of help to cover that.
"To ensure that it does not affect Malaysia's tourism destination for purposes of luring tourists to purchase to come over here, there is supposed to be a mechanism to enable them to get the refund when they leave the country," he said.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the 2024 budget is still an expansionary budget albeit cautious.
This was indicated by the narrowing of the fiscal gap from 5.0 per cent of gross domestic product (GDP) in 2023 to 4.3 per cent of GDP in 2024.
"Raising the services tax rate from 6 per cent to 8 per cent, tax on luxury goods and diesel subsidies rationalisation are some of the key areas that would help the government to lower the fiscal deficits," he added.