Kuala Lumpur: The government has decided not to proceed with the implementation of the high-value goods tax (HVGT), according to the Finance Ministry (MOF).
In a written reply on the Parliament website, the MOF stated, however, that the principles of the HVGT have been incorporated into the revised sales tax structure, with luxury and discretionary items taxed at five or 10 per cent.
The ministry said this in response to a question from Datuk Shamshulkahar Mohd Deli (BN-Jempol), who asked about the projected rise in national revenue resulting from fiscal reform measures, including the introduction of HVGT, the digital goods tax, capital gains tax (CGT), low-value goods tax, and the expansion of the SST tax and subsidy rationalisation that are being or will be implemented.
The proposal to introduce HVGT was first announced at the revised presentation of Budget 2023 in February 2023.
Initially planned to be implemented by May 2024, the government had expected to generate an additional RM700 million annually from it.
However, the government at that time indicated that more time was needed to engage with relevant stakeholders to ensure its effective implementation without negatively impacting the economy.
Meanwhile, the MOF said the government has taken several steps under direct and indirect taxation to strengthen national revenue collection.
Among them is the implementation of the CGT, effective March 1, 2024.
“Based on the current transaction volume and value involving unlisted shares, the government estimates revenue collection of about RM800 million a year,” it said.
The sales tax rate revision and the expanded scope of the service tax, effective July 1 2025, are also expected to contribute an additional RM5 billion revenue in 2025, doubling to RM10 billion in 2026.
As for diesel subsidy targeting, it has so far generated RM600 million in monthly government savings.
Additionally, the low-value goods tax, effective Jan 1, 2024, recorded a collection of about RM500 million for the year 2024.
The government’s decision to halt the proposed high-value goods tax (HVGT), formerly known as the luxury goods tax, will not affect the RM700 million tax revenue expected from its implementation, said an economist.
Sunway University economics professor Dr Yeah Kim Leng said the move will instead ease concerns over the potential impact of the tax on consumer and tourist spending, as its incorporation into the existing expanded Sales and Service Tax (SST) has removed uncertainty over which items are subject to tax.
He explained that since the principles of the HVGT have been integrated into the expanded SST structure, where luxury and discretionary items are now taxed at five or 10 per cent, the rates are effectively the same as those proposed for the HVGT in Budget 2023.
“The revenue target will not be affected as the same SST rate will be applied without the need to define which goods are considered high value,” Yeah told Bernama.
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