Kuala lumpur: The government’s decision to halt the proposed high-value goods tax (HVGT), formerly known as the luxury goods tax, will not affect the RM700 million tax revenue expected from its implementation, said an economist.

According to BERNAMA News Agency, Sunway University economics professor Dr Yeah Kim Leng stated that the move will ease concerns over the potential impact of the tax on consumer and tourist spending. The incorporation of HVGT principles into the existing expanded Sales and Service Tax (SST) has removed uncertainty over which items are subject to tax.

Dr. Yeah explained that since the principles of the HVGT have been integrated into the expanded SST structure, where luxury and discretionary items are now taxed at five or 10 percent, the rates are effectively the same as those proposed for the HVGT in Budget 2023. This integration means the revenue target will remain unaffected as the same SST rate will apply without needing to define which goods are considered high value.

The Ministry of Finance (MOF) confirmed in a written parliamentary reply that the government has decided not to proceed with the HVGT implementation. However, it noted that the principles of the HVGT have been retained under the revised sales tax structure, where luxury and discretionary goods are now taxed at five or 10 percent.

The HVGT was initially introduced in the revised Budget 2023, tabled by Prime Minister Datuk Seri Anwar Ibrahim in February 2023. It was initially scheduled for implementation in May 2024, with proposed tax rates ranging from five percent to 10 percent. The government projected that this tax would generate an additional RM700 million in annual revenue.