Can Malaysia’s e-commerce side hustles survive as ‘low-value goods’ tax hike bites?
- A 10 per cent tax on purchases of ‘low-value goods’ under 500 ringgit (US$115) has left small e-commerce businesses worrying for their future
- Social media users question the additional burden on medium- to lower-income Malaysians who will be most affected by the new tax, instead of the rich
“It’s for side income, but maybe I need to start doing something else,” said Farah, who started her business after being made redundant from her clerical job at the height of the pandemic.
“There goes my money for K-pop albums,” said another Twitter user Nur Asma, responding to the news.
At the time, the government argued the tax would also protect local business owners and strengthen the domestic market from outside competition.
“When we empower the local market, local business owners, surely our money does not flow out,” said First Deputy Finance Minister Shahar Abdullah last August when the tax was proposed.
Malaysia has grown increasingly comfortable with online purchases, which are backed by widely accepted cashless transactions, as more than 80 per cent of its population of 32 million now uses e-commerce sites, predominately via smartphones.
Last year, the country recorded 290.3 billion (US$66.5 billion) ringgit in annual e-commerce income, a spike of 18.3 per cent from the previous year, according to the Department of Statistics Malaysia.
Lambasting the new tax, writer Firdause Jesfry said that the public should push for more progressive taxes on wealth, windfall, inheritance, capital gains and other sources of income or else be stuck with regressive taxes that hurt the middle- and lower-income groups.
“If we don’t push them to tax the rich, who will they tax more to ensure the fund will be sufficient? Us,” Firdause said.
Economist and former member of parliament Nungsari Ahmad Radhi echoed this sentiment, saying that while he agreed the country’s revenue base needed to be increased, tax increases should not be done in a piecemeal manner like this without addressing wealth-based taxes such as those imposed on capital gains.
“It has to be done as comprehensively as possible to be seen as equitable,” Nungsari told This Week in Asia.
Not everyone is unhappy with the tax, such as sellers like Satish Raguchandran who have to pay import fees and a 10 per cent sales tax for his merchandise.
“It does level the playing field for us. Currently, some sellers are selling directly from China and they have a tax advantage,” said Satish, who owns home appliance brand Russell Taylors.
Singapore’s then-Deputy Prime Minister and Minister of Finance Heng Swee Keat in his 2021 budget speech said the city state’s extension of its GST to include low-value goods from 2023 would similarly “ensure a level playing field for local businesses”.
Despite calls for its reintroduction, the stigma of its association with Najib is making subsequent administrations shy away from the tax, with Anwar’s deputy at the finance ministry, Ahmad Maslan, saying it is not a topic currently being explored.
“The government has not discussed it. There has been no decision on that yet,” Ahmad said.
Instead, the government is looking for ways to reduce existing tax leakages, which cost the country up to 5 billion ringgit in lost revenue just from the sale of illicit cigarettes.
“If we tighten things up, even without new taxes we can increase our revenue by 3 to 5 billion ringgit,” he said.