GEORGE TOWN: The list of luxury goods that will be taxed as proposed in the revised 2023 Budget is being refined, amid concerns that the move is not well thought out and will likely affect tourism and the retail industry, in particular.
Deputy Finance Minister Steven Sim said the government was still fine-tuning the definition of luxury goods as well as the rate and coverage before announcing it accordingly.
He reiterated that the Luxury Goods Tax, proposed by Prime Minister Datuk Seri Anwar Ibrahim when tabling the revised budget on Friday, would be implemented this year.
"Luxury handbags and luxury watches are some examples. Wait for the announcement. We are working on the timeline," he told the New Straits Times.
Asked if the luxury items also constituted high-end clothing, wallets, sports cars, high-end bikes and even jewellery, Sim said all the details were being refined.
Pressed further if the move would affect the luxury goods sector as the country was known as a shopping haven for high-end goods, Sim said there would be trade-offs in any policy implemented.
"But we will ensure we continue to be competitive. Sectorial feedback will be considered."
The government planned to tax certain luxury goods of prescribed value with effect this year.
Anwar, who is also finance minister, had said the government wanted to take a more progressive approach as a new step to broaden the tax base to those who had the means.
The proposal had, however, drawn concern from tourism players, with many fearing that it would cripple the country's charm as a tourist shopping hotspot.
Malaysia Retailers Association president Datuk Andrew Lim said that such tax would only harm the tourism industry since the country had to contend with strong competition from neighbouring countries.
"The government should be assisting retailers and the tourism industry to attract more tourists with spending power to stimulate Malaysia's economy," Lim reportedly said.
It was also reported that shopping by international tourists was a key revenue earner for the country, accounting for 33 per cent of the RM86.1 billion in tourism receipts in 2019.
RHB Research analysts Wan Muhammad Ammar Affan and Loong Kok Wen said the proposed luxury tax might reduce retail sales, and subsequently affect rental reversion rates.
"A lot of the retail sales growth in the past year has been attributed to fashion tenants that make up a high proportion of net lettable area in Pavilion Kuala Lumpur and Suria KLCC," they said.
Wan Muhammad Amar and Loong, however, said the net impact should be minimal given the expected increase in the number of tourists this year to boost retail spending at such malls.
They noted that a total of RM250 million had been allocated to promote the tourism sector in the 2023 Budget, targeting an arrival of 23.5 million international tourist arrivals in 2025.