Worry over move to tax gold

Photo: AZMAN GHANI/The Star

PETALING JAYA: While the luxury goods tax is being fine-tuned, concerns have arisen about whether the purchase of gold should be taxed.

The goldsmiths and jewellery industry players have been engaging with the Customs Department on several occasions about the luxury goods tax.

They said it would be a wrong move to impose taxes on gold jewellery, adding that even gold bars should be spared as they are an “instrument of investment” for the people.

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Mohamad Shaifudeen Mohamed Sirajudeen, the chief executive officer of SMS Deen Jewellers, said gold is not equivalent to luxury items such as a yacht, expensive cars or other high-end items.

“Taxing on gold means we are depriving the B40 and M40 of any form of investment.

“With Employees Provident Fund savings being utilised during the pandemic, it’s fair to say gold was the only investment they profoundly made due to its ability to be resold or pawned.

“Gold prices had gone up 25% during the pandemic. The precious metal has worked favourably for many ordinary families to stay afloat.

“It showed us that something of high value may not be a luxury. Gold is such a normal instrument for the man on the street to invest in for the future. It should not be taxed,” he told The Star.

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On Feb 24, the government announced a luxury goods tax for certain luxury items like watches and fashion goods, that would be implemented as part of its efforts to tackle the country’s current rising cost of living issue.

The proposed tax has since drawn concerns from some quarters including tourism players across the industry with many fearing that it would cripple the country’s attractiveness as a tourist shopping hotspot.

Mohamad Shaifudeen said 916 gold (22K gold) is preferred as jewellery products, while the gold bar or 999 gold (24K gold) is preferred as an investment.

For “store of value”, he said Malaysians have always resorted to gold during the tough times to pay for medical expenses, children’s education, capital for business and distribution of wealth among family members.

While a gold bar generally refers to a 1kg gold bar valued at about RM280,000, he said it is also available for 1g so that anyone could start small to keep gold.

ALSO READ: Jewellery is also culturally sought after

Federation of Goldsmiths and Jewellers Association of Malaysia’s adviser Datuk Ng Yih Pyng said gold can be sold or pawned later for a good amount, where the spread value is not so high unlike gemstones, referring to the difference between gold dealers’ selling price and their buy-back price.

Ng, who is the group managing director of Tomei Consolidated Bhd, said most countries do not impose tax on gold jewellery and gold bars, while some may impose the goods and services tax (GST) on jewellery, which is claimable for tourists.

He shared that over 90% of transactions at Tomei outlets were not above RM10,000, where consumers mostly bought gold for their own use or investment.

“On the other hand, more office workers and professionals are into investing in gold bars,” he said.

“They can afford to buy 10g a month and buy more over time as savings.”

Ng said imposing a tax on buying gold will see an outflow of money, as some people may opt to buy it overseas.

“For many families in Asia, it has been a traditional practice to buy ornamental gold jewellery as a form of savings that does not deplete in value. The rich may invest in gold bars while the others buy gold as and when they can afford it,” he said.

Malaysian Indian Goldsmith and Jewellers Association president Datuk Abdul Rasul Abdul Razak said taxing gold products would affect the small gold and jewellery traders as the M40 and B40 would lose their purchasing power.

Even if a low tax is imposed on the items, it would also impact the whole chain of the gold industry.

“The tax may affect the B40 and M40 groups. Even low taxes would have a significant value for them.

“When this happens, they might not be interested to buy gold anymore as their purchasing power has been reduced. This will affect the industry,” he said.

Abdul Rasul said the tourism industry would also be affected as travellers might avoid purchasing jewellery in Malaysia due to the tax.