“If you are able to make more money in this country, if you are able and can afford to spend RM20,000 on a handbag or RM50,000 on a watch then we want you to contribute a bit more back to the country,” Steven Sim told FMT in an interview.

The government has come under criticism over its plan to impose a 5% to 10% tax on luxury goods in a bid to boost the government revenue base. Retailers such as the Malaysian Indian Goldsmith and Jewellers Association have warned of a huge loss of revenue.

There are also grouses that the tax will lead to a perception that Malaysia is an expensive shopping destination even though foreign tourists are exempt and that middle-income earners who save up to buy the occasional luxury good will have to spend more.

Sim said while the government had the option of other forms of taxation, it did not want to introduce a tax that would affect the lower-income group.

“And again this is a consumption tax. When you do not buy (luxury goods) you don’t get taxed. But when you buy something expensive then you contribute a bit more.”

But Sim said the government was aware of the concerns surrounding the tax and this is why it engaged stakeholders prior to announcing plans for the tax.

In the case of the exemption for tourists, he said the decision was made based on feedback that tourists may choose to shop in other countries if they have to pay the tax.

“This will discourage tourists from visiting Malaysia and therefore, the tax department agreed (to not tax tourists) to prevent impacting the tourism industry,” he said.

Sim said the government is also trying to address concerns of different sectors, including adjusting the threshold for the imposition of the tax on goods that are also purchased by those from the lower and middle-income groups.

“It will not (necessarily) be brand specific. It will be a category of items, say handbags, jewellery watches and so on, and there’s a price threshold (for each category).”

On how much money the government aims to collect from the luxury tax, Sim said they have yet to finalise a figure.

“It’s a new tax, we are still working on the quantum to charge, the categories of items. Again consultations (with stakeholders) are still ongoing.”