He feels it will also lead to the creation of a black market for expensive goods.
“It sounds good on paper but it is impractical. Luxury is subjective. So how do you define it?” Bumiputra Retailers Organization president Ameer Ali Mydin told FMT.
“Do you go by the brand? There are so many brands. Some may say it depends on the price. A smartphone that costs RM2,000 may not be considered a luxury item but a RM500 dinner may be considered a luxury,” he said.
The Bumiputra Retail Organisation president said the introduction of the luxury tax will give the impression that buying such goods in Malaysia would be more expensive than in neighbouring countries.
“Tourists and locals alike will be more inclined to shop overseas and we will lose out. It will also lead to a black market where people sell luxury goods without invoices to avoid the tax,” Ameer said.
On a proposal that tourists be exempted from paying the tax, Ameer said it would also be a “headache”. “How do we know who is a tourist and who is not?” he asked.
Tourism industry players and Puchong MP Yeo Bee Yin are among those who have called for tourists to be exempted from the luxury tax.
Ameer said given the challenges in implementing the tax, collection targets may not be met.
“If the end goal is to increase tax revenue, the government should just reintroduce the goods and services tax (GST) at 1% and make it applicable to everything,” he said.
“At 1% the effect of the GST on the price of goods and services will be negligible and you’d probably get more revenue than via the proposed luxury tax,” he added.
Firdausi Suffian of Sabah UiTM also said defining “luxury” could prove difficult and may have unintended consequences, particularly on those in the M40 income group.
“It looks progressive and politically, it will get you brownie points, but implementation will be problematic,” he told FMT.
He also said people who did not earn much but saved up to buy “something nice once in a while” may feel they are being unfairly taxed.
Firdausi, a political economist, also voiced concern the tax could lead to the creation of a black market for luxury goods.
“If the government wants to increase revenue, there are better ways. A capital gains tax is a good way.
“But beyond increasing revenue, the government should focus on reforming its spending with the objective of achieving savings.
“This means axing unnecessary projects, improving procurement processes and ensuring more targeted subsidies.
“The GST is the best option but if the government does not want to implement it now, then it should see how it can save money,” Firdausi added.
It was previously reported that the abolishment of the GST in 2018 has cost the government some RM20 billion a year in tax revenue.