The Malaysia luxury goods tax has been a bone of contention between countries like Singapore, Thailand and Australia ever since its inception. There is no question that the levy has been an effective way of making sure that goods produced in these three countries are sold on proper price lines, with proper mark-ups to their respective markets. It is also a source of revenue for the government of Malaysia, which hopefully will see it as a major tool in keeping its currency strong against the US dollar. That being said, the law has often been misinterpreted and maligned in both the domestic and international market because of its supposedly prohibitive nature.
This article will look into the popular misconceptions surrounding the Goods and Services Tax (GST), Malaysia and the practice of tax evasion by businesses here in Malaysia. Luxury goods are not exempt from the tax. On the contrary, all goods in general are required to pay the tax by the producer before his products are released in the market.
In general, this means that any item that can be considered luxury is subjected to the tax. Whether it is automobiles, clothes, accessories, electronic gadgets or even computers, if you bought them in excess of the allowable limit, you are liable to pay the tax and will end up with the corresponding fine. On the other hand, this does not pertain to items that are custom made or specially designed. Such items are generally exempt from the tax altogether.
While it is true that luxury goods are usually more expensive, that does not mean that they are exempt from paying the goods and services tax. If you buy luxury goods that fall within the tax exemption boundary, you will still have to pay the corresponding tax. It is just that the amount of tax that you have to pay will be substantially lower than what you would pay when you do not fall under the tax’s jurisdiction. For instance, you will pay income tax on your income earned abroad but not on your income earned at home. In Malaysia, this means that you will not be required to pay income tax when you earn foreign exchange income or when you use your personal vehicle to travel abroad.
When it comes to luxury goods, one cannot talk enough about them. However, since these goods are required to be imported and cannot be transported in free air, most of them are priced based on the transport cost. Thus, if the goods were priced without reference to transport cost, there would be a huge gap between the value of the good and its actual tax cost. The Luxury Goods Tax in Malaysia works like this – a certain percentage of the retail price of a product is exempted from taxation.
This not only helps retailers to attract customers but also makes it easier for authorities to enforce legislation. Luxury goods are not cheap, so if the tax was imposed on the luxury goods of retailers, the retailers will not be able to make as much profit as they can otherwise. If more people start to follow such regulations, the burden on the poor will decrease and so will the incidence of tax evasion. In fact, it is reported that the Malaysian authorities have actually succeeded in decreasing cases of tax evasion of non-payment by businessmen.
Now that the use of the luxury items has become popular all over the world, more retailers are looking for ways of getting these goods into the hands of customers without having to pay the full price. They are looking for ways of lowering the price of luxury goods so that customers will pay a part of the retail price or even just a little bit. This way, they will be able to encourage more sales and increase profits. So, when they are asked about the Luxury Goods Tax in Malaysia, they would certainly say that it is a good thing and is an essential regulation for the protection of the luxury goods industry in Malaysia.
When the Luxury Goods Tax was imposed in Malaysia, retailers were not very happy with this. However, this did not stop them from trying to get the Luxury Goods Tax imposed in other countries also. In fact, this might just be another tactic to protect their share of the market. On the whole, though, the retailers are now very happy that their competition with the luxury goods industry is reduced and that there is an increase in the volume of imports.