KUCHING: The imposition of sales tax on low-value goods (LVG) purchased online should be delayed until the global economy is more stable. It was earlier proposed to be effective 1January 2023.
Universiti Malaysia Sarawak (UNIMAS) economist Dr Jerome Kueh said the domestic sellers who heavily rely on the online platform for conducting business will be concerned about the implementation of the Sales Tax (Amendment) 2022 on low-value online goods.
“Given that the majority of businesses are still recovering from the effects of the COVID-19 pandemic, the timing of imposing the online sales tax could be problematic.
“Their company may suffer as a result of the online sales tax because it will cut into their profit margin. When the profit margin shrinks, the survival of domestic sellers will become uncertain,” Jerome explained.
He agreed that the Sales Tax (Amendment) 2022 could support market stabilisation and protect domestic vendors.
“Low-value goods (LVG) are imported goods that are exempt from taxes and are sold online. Because domestic goods are subject to sales tax but imported goods purchased online are not, this leads to market distortion.
“As a result, domestic and foreign sellers compete unfairly in the marketplace. The amount of our currency leaving the country rises along with the volume of e-commerce imports,” he said when contacted by New Sarawak Tribune, recently.
He opined that the 10 percent rate is comparatively high if online sales tax is to be implemented. A single formula might not apply to all models.
“As opposed to a situation where the online tax rate is based on a different sales value rather than the 10 percent tax rate for value below RM500, I believe the progression tax rate may be more appropriate.
“This is so because small businesses make up the vast majority of online retailers of goods priced under RM500,” he explained.
Hence, he said the sales tax without a doubt, would have an impact on the local buyers and sellers.
“The potential for the tax burden to be transferred to consumers in the form of higher market prices is concerning.
“Sellers may be forced to raise the market price of their goods as a result of the online sales tax. Although it might be possible for sellers to take on the tax burden, doing so would make it impossible for them to continue operating their company because of the drop in profit. Consumers will eventually have to pay more for goods purchased through online retailers,” he added.
He said under such a situation, people would be less likely to engage in online commerce as a result of the sales tax because the profit margin would be smaller.
This might deter people from involving in the e-commerce sector. People must, however, be able to adapt to new situations and responsive to changes in the market.
“E-commerce sellers can always find ways to innovate in their online business practices, such as through non-price factors like product differentiation, sales service, and so on,” he said.
