M'sians start paying new sales tax on overseas goods bought online, Latest World News - The New Paper

M'sians start paying new sales tax on overseas goods bought online

Malaysia’s new sales tax on items bought online from overseas merchants has drawn mixed reactions, with local sellers saying they welcomed the fairer competition while others raised concerns that the higher prices would burden poorer Malaysians.

In a move aimed at encouraging demand for local products, Malaysia began imposing a new 10 per cent low-value goods (LVG) tax from Jan 1, 2024, on items priced below RM500 ($140) that are bought online and delivered from abroad.

The government said the new sales tax would help level the playing field for local and overseas sellers by addressing the disparity in their tax treatment.

There is a 6 per cent sales and service tax on locally produced items.

Local business associations have lauded the move, but some shoppers told The Straits Times they may cut their spending.

The Small and Medium Enterprises Association of Malaysia, which has more than 3,500 members, said the tax would allow local sellers to compete, while driving additional revenue to Malaysia that, in turn, would bolster the faltering ringgit.

“We will be monitoring closely the sales trend for local sellers and retailers post-implementation of the LVG tax to see if it translates into an uptick in sales,” association president William Ng told ST.

In a statement in December, Datuk Ng said that local retailers had been fighting unfair competition from foreign sellers for many years.

“While local retailers have to pay tax at various points of the supply chain, including when bringing components or raw materials as well as finished goods into Malaysia, we are being undercut by foreign sellers and local drop-shippers who have largely escaped from paying tax to Malaysia on their products. This artificially distorts pricing in favour of these foreign sellers,” he said.

The tax was originally scheduled to start in 2023, but was delayed to allow the government to engage with industry players and key stakeholders about its implementation, said the Ministry of Finance. The government hopes to collect up to RM200 million a year from the tax.

A random check found that online shopping platforms like Shein and Shopee have begun charging the LVG tax on purchases.

Malaysians who frequently shop online for overseas products said they may now think twice about their buying, with the new tax.

Digital manager Emily Teo, 44, who spends about RM1,000 a month on home appliances and fast fashion, said: “I think this will definitely control my spending a bit.

“I will buy from local retail shops more now due to the tax.”

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