July 31, 2025
PETALING JAYA – The decision to scrap the High-Value Goods Tax (HVGT) has brought mixed reactions, highlighting the complexities of balancing tax policy with economic growth.
While some see it as unfair to tax common folk while bringing relief to the rich, others feel it would help the economy and prevent cases of double taxation.
This reflects a missed opportunity to address deeper questions of tax fairness and structural reform, the Federation of Malaysian Consumers Associations (Fomca) claimed.
“From a consumer perspective, the decision to cancel the luxury goods tax may come as a relief, especially after the recent SST (sales and service tax) hike,” said Fomca secretary-general Dr T. Saravanan.
However, he added that the implication is significant from a structural point of view.
“A luxury tax, even if it only adds a small amount to national income, would help widen the government’s sources of revenue and reduce reliance on taxes like the SST, which affects all Malaysians,” he said yesterday.
“By scrapping the luxury tax but still taxing basic goods, the government may seem unfair, with lower income people paying more tax compared to what they can afford,” he added.
Similarly, Malaysian Consumer Friendly Organisation vice-president Azlin Othman said the decision raises questions as to why the wealthy are not taxed more, while lower- and middle-income groups still have to pay taxes on basic items.
Azlin said cancelling the luxury tax would also reduce government income, which could have been used for public welfare or development.
“Even if the luxury tax doesn’t bring in a lot, it’s still a valid source of income from the top 20%,” she said.
The HVGT was initially slated to commence on May 1, 2024, after it was tabled during Budget 2023.
However, the government has revealed at the Dewan Rakyat that the plan had been scrapped.
Economist Prof Dr Ida Yasin believes the tax on luxury items should be maintained with a refined mechanism.
The tax could be targeted at tourists, she said.
“When tourists come to our country, besides sightseeing, they also shop,” she added.
While the HVGT would target people with higher income, she said its effectiveness was still questionable.
“If the tax is introduced, it might lead to rich individuals buying luxury goods abroad,” she said.
Tax expert Datuk Koong Lin Loong is one of those who welcomed the government’s move, saying it would give a positive signal to the market on Malaysia’s robust tax policies.
He said it would be good for the economy as it would also remove the potential of multiple taxes.
“Removing HVGT can avoid double taxation on goods,” he said.
It would also help the government save resources that could be used for other purposes.
Another tax expert, Thenesh Kannaa, said the Malaysian tax system needs simplification, not the introduction of new ones.
“Intuitively, one may think the luxury goods tax is an effective way to tax the rich to meet the country’s fiscal needs … but it’s not that simple.
“Imposition of a special tax on luxury watches sold in retail outlets here does not prevent Malaysians from buying the same item overseas,” he said, adding that this would only hurt the local industry.
He believes the government’s decision was made based on the costs and benefits for collective well-being.