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Engagement Session with Ministry of Finance (MOF) on Proposed Luxury Tax – March 23, 2023
The key highlights of meeting chaired by Encik Ezleezan bin Othman, Section Head (Policy & GST Implementation), Ministry of Finance (MOF) were:
a. As announced in the Budget 2023, the government is considering a new tax on luxury items on the following three (3) proposed categories:
- Vehicles including helicopters, planes, cars, motorcycles, yacht or luxury boats;
- Liquor; and
- Fashion items including jewellery.
b. FMM was informed that although the details such as the specific items, value, type and operation of the tax has not been finalised, the initial consideration by MOF is to utilise the current sales tax regime imposed at the manufacturing level or on imports.
i. FMM’s response and comments on the issues raised at the meeting:There is a need to clearly define what specific items are classified as luxury goods.
ii. Based on feedback received from FMM members, even though goods produced by local manufacturers may fall into the broad categories of taxable goods being considered particularly fashion items, to a very large extent these goods are not within the range of pricing and status that would generally categorise as “luxury” in the local retail market.
iii. To a large extent, the locally manufactured jewellery (particularly gold) may not be categorised as luxury goods, but more as an investment item purchased by mainly the lower income group. Our manufacturers are concerned of the possibility of double taxation if precious metal such as gold is taxed, and the finished product taxed again.
Moreover, the local manufacturers are just starting to recover from the effect of the pandemic, and any tax that affect local demand would have an adverse impact on the industry.
iv. As for liquor manufacturers, FMM is of the view that the products are already heavily taxed at this time and the industry is already suffering loss of business due to smuggling activities which is rampant when higher taxes are introduced.
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Head Office, International Business Division
(Cik Shamini Sakthinathan)
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