ONE of the functions of taxes is income distribution. Typically, the government collects taxes from those with higher incomes and distributes it to those who are more needy such as through subsidies or direct cash hand-outs.

So, it came as a shock that The Edge reported that the government has shelved plans to impose the high-value goods tax which was initially slated for implementation starting May 1.

Also known as “luxury tax”, the postponement was due to disputes over what constituted “high-value goods” and the price range, according to the business news outlet.

For the record, the Finance Ministry did not table the High Value Goods Tax Bill in the Dewan Rakyat which adjourned on Wednesday (March 27). The plan was originally announced in the revised Budget 2023 and further detailed one year later.

The postponement has raised troubling questions. How is it that the government has little difficulties rolling out a slew of other taxes that impact the lower income groups but dragged its feet on a tax that targets the rich?

In January 2024, new taxes such as the low value goods tax (LVGT) at 10% for e-platforms, a 10% capital gains tax (CGT) and a 5% increase in electric bills for the M40 were introduced. February saw an average 15% spike in water tariffs. This month saw the sales and service tax (SST) being hiked from 6% to 8%.

Many of these taxes impact the lower income groups, many of whom are already having difficulties making ends meet due to rising costs of living. These are the people who had to fork out extra when purchasing low-cost goods like baby formula from online shopping platforms or when getting their children’s computers fixed.

And who are those who enjoy a reprieve from paying the high-value goods tax for now? While there is no official announcement yet, foreseeably they include those who splurge on high-end jewellery, designer clothes or costly spare parts for private yachts.

Where is the fairness in this? Why the speedy implementation of taxes that burden the poor but delay in taxes that the rich could barely feel?

And what about the foregone extra revenue the government could have collected from the high-value goods tax? It was earlier reported that the government could collect up to RM700 mil per year alone with this tax.

This lesser tax revenue owing to the delay means the government has less to spend, especially on alleviating the hardships of those in the B40 and M40 categories.

And this is despite the government having more than one year to plan this out since it was first announced in February 2023. Based on this, it wouldn’t be a stretch to say that the government places higher priority in taxing those with lower income compared with those who are more well off? - March 29, 2024 

https://focusmalaysia.my/luxury-tax-deferment-why-is-the-unity-govt-quick-to-tax-the-poor-but-slow-to-milk-the-rich/