LVG tax won’t adversely impact consumers, says e-commerce group

 

The Malaysia Cross Border e-Commerce Association said since these items usually cost RM30, RM50 or RM100, the difference in price after paying the 10% tax would be minimal.

PETALING JAYA: The introduction of tax on low-value goods (LVG) priced at RM500 and below purchased from overseas won’t affect consumers adversely, says an e-commerce association.

On Dec 18, the finance ministry announced that a 10% tax would be imposed on imported LVG sold online to level the playing field for businesses in Malaysia, especially micro, small and medium-sized enterprises (MSMEs) and those operating from brick-and-mortar premises.

Eng Kin Hoong.

Eng Kin Hoong, the president of the Malaysia Cross Border e-Commerce Association (MCBEA), said consumers do not make regular online purchases from overseas of goods that are subject to this LVG tax. As such, they would not mind paying an extra 10% for the items they order.

“Most of these (goods sold online) are priced below RM500. They are (usually) priced at RM30, RM50 or RM100. So, the difference (in pricing) would be very minimal,” he told FMT.

“When consumers look at it, they would say: ‘I need this product. Yes, it is slightly (more) expensive, but I have no issue with that.’

“So we (online commerce platforms) don’t see any impact on the consumers.”

However, Eng said that MCBEA was concerned about how the government is going to implement this LVG tax, stressing that this matter needs to be addressed by the authorities.

Meanwhile, Yeah Kim Leng, of Sunway University, said the impact of the LVG tax on consumer spending and businesses was likely to be minimal and temporary.

The economist said most of the goods and services sold online are already subject to the prevailing sales and service tax (SST).

Yeah Kim Leng.

As such, budget-constrained consumers may make fewer purchases online from overseas due to the LVG tax. However, this dampening effect would taper off as consumers get used to the higher prices, he added.

In addition, LVG purchased online from overseas retailers only make up a relatively small proportion of the consumption base, which was estimated at RM1.03 trillion, or 58% of nominal gross domestic product, in 2022, Yeah added.

Yeah also said that introducing the LVG tax would help equalise the playing field for local businesses that collect sales tax with the online local and foreign sellers who do not pay the tax.

“The MSMEs involved in LVG business may experience a slight dip in transactions at the onset, as is commonly observed when prices are raised,” he told FMT when asked whether the imposition of such a tax would level the playing field for local businesses.

“The actual impact on MSMEs will depend on the income and price elasticity of demand for a particular product. If the item is affordable and competitive in terms of pricing, quality and ease of purchase, online retailers will be less affected by the tax.”

The tax was introduced in an amendment to the Sales Tax Act passed by the Dewan Rakyat in August last year and was to have been imposed from April 1 this year but was later postponed.

The Dewan Rakyat was told last year that the government expected to collect RM200 million a year from this tax. - FMT