(C) Bloomberg.com
Malaysia has started to impose a new 10 per cent sales tax on low value goods (LVG) that are sold online and shipped from abroad to customers in Malaysia, effective from January 1, 2024. The new tax, which applies to goods priced below RM500 each, has drawn mixed reactions from online sellers, local businesses, and consumers, who have different views on the benefits and drawbacks of the policy¹.
The new sales tax on LVG is meant to encourage Malaysians to purchase more locally made products and to level the playing field between foreign and local sellers, who are currently subject to a 5 per cent to 10 per cent sales tax on items sold. The new tax is also expected to generate additional revenue for the government, which could be used to fund public services and development projects¹.
Some of the pros of the new sales tax are:
The new sales tax on LVG could also have negative effects on the online sellers, local businesses, and consumers, who may face higher costs and risks, and lower choices and convenience, as a result of the policy. The new tax could also create challenges and issues for the implementation and enforcement of the policy, which may require more resources and coordination from the government and the stakeholders¹.
Some of the cons of the new sales tax are:
The new sales tax on LVG, therefore, is a complex and controversial policy that has pros and cons for the online sellers, local businesses, and consumers, and for the economy and the society. The new sales tax, therefore, should be evaluated and reviewed regularly, and be adjusted and improved accordingly, to ensure that it achieves its objectives and benefits, and minimizes its costs and harms, for all parties involved.
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