Don’t let new tax kill off tourism shopping, urge groups

PETALING JAYA: Allow tax rebates at the country’s exit points to maintain Malaysia’s status as a shopping paradise, tourism industry players have suggested.

Malaysian Association of Tour and Travel Agents (MATTA) president Datuk Tan Kok Liang said shopping by international tourists is a key revenue earner for the country, representing some 33% of the RM86.1bil in tourism receipts in 2019.

To maintain Malaysia’s status as a shopping heaven, he said the government should allow tourists to get tax rebates for their shopping when they leave the country – but with terms and conditions.

“Please give tax deductions to foreign visitors since the industry is still recovering (following the pandemic). We need Malaysia to be attractive because the spin-off effects are greater than the revenue earned,” he said.

Tan was commenting on the government’s plan, announced under the revised Budget 2023, to introduce a luxury goods tax on branded items starting this year. The rates will depend on the type of product.

When contacted yesterday for further information on the tax, Deputy Finance Minister Steven Sim said his ministry was working on the tax structure.

“It will most likely be added to the sales tax,” he said.

Agreeing with Tan on giving tax rebates to tourists was Malaysian Inbound Tourist Association (Mita) president Uzaidi Udanis.

He cited the United Kingdom as an example, where tourists claim refunds on the value-added tax (VAT) at the airport upon departure, making the country a more attractive destination for luxury shopping.

He added that high-end shoppers come to Malaysia due to the attractive currency exchange rate and competitive pricing of luxury goods.

Malaysia Retailers Association president Datuk Andrew Lim said having a luxury goods tax would only harm the tourism industry since Malaysia has to contend with strong competition from neighbouring countries.

“The government should be assisting retailers and the tourism industry to attract more tourists with high spending power to stimulate Malaysia’s economy.

“Fair enough that the government is imposing a higher tax on the T20 group to subsidise the B40 and M40 groups, but it should not kill the golden goose.”

Lim said tourist arrivals were already lower than expected and every effort must be made to boost the numbers.

Malaysian Shopping Malls Association president Tan Sri Teo Chiang Kok also feels imposing the luxury goods tax would drive tourists to shopping destinations in other countries where there are lower or no taxes.

“We may lose our current competitive edge as a shopping paradise, even with an exchange rate that’s favourable to foreigners,” he said.

He said he hopes the government will release more details including the definition of luxury goods soon.

“If it includes goods that are popular with tourists, it will negatively affect us.

“Furthermore, we do not have the Goods and Services Tax for foreigners to claim back for their shopping,” he added.

Malaysian Textile Manufacturers Association president Datuk Seri Tan Thian Poh said it hopes all local brands and locally manufactured luxury products will be exempted from the tax.

“Retailers are expected to face headwinds next year, and the government should assist them,” he said.

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