To Monash University Malaysia professor Niaz Asadullah, Putrajaya’s broadening of its revenue base via the luxury goods tax simply reflects its current priorities and the prevailing societal attitudes.
“Given the perception of high and widening wealth inequality, the move to hike tax on luxury goods will enjoy mass support as it’s perceived to be progressive. Yes, it’s true that for a segment of middle-class Malaysians, gold jewellery has an investment value.
“But the government does not view this as a productive choice. At a time when cost of living remains high and household debt is growing, the new tax may have the added objective of discouraging unnecessary conspicuous consumption among the B40 and M40 groups, some of whom are struggling to make ends meet,” he says.
Niaz surmises that with the launch of the New Industrial Master Plan 2030 last September, the priority has now also shifted from a wealth tax targeting luxury goods consumption and capital gains to supporting the development of industries producing sophisticated and complex products or those that adopt higher production technology.
“An added focus is on industries that are more likely to create higher wage jobs. On both counts, our jewellery industry is no longer a top priority. So, despite its export orientation, Anwar [Ibrahim, the prime minister] may at best agree to a staggered increase [on the quantum of tax] so that the jewellery and gold processing industry can adjust to the new normal of higher tax. Another alternative concession could be to exempt purchases by foreign tourists through the Tourist Refund Scheme (TRS),” he suggests.