More than meets the eye

LVG tax: More than meets the eye

Time to shine: SME Association of Malaysia president Ding Hong Sing says local traders should diversify their products, now that they have a more level playing field against their overseas counterparts.

PETALING JAYA: It was supposed to be a clear-cut case of adding 10% of the low-value goods (LVG) tax to the price of imported goods tagged below RM500 sold through ecommerce platforms.

However, to the shock of consumers, the total to pay is not a mere additional 10% for some goods as overseas sellers have adjusted their prices.

A check by The Star found that some product prices have doubled from last week after the LVG tax was imposed on Jan 1.

“There will definitely be some price adjustments by online traders to ensure that they will be able to maintain their profits after the introduction of the LVG tax,” said Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) treasurer Datuk Koong Lin Loong when contacted yesterday.

This is because online traders will have to collect and disburse the 10% tax on behalf of the Customs Department and resort to price adjustments to make up for the drop in profits, he added.

“For example, an iPhone casing which cost RM100 will now cost RM110.

“So the price is likely to be marked up by online traders to maintain profits,” he said.

He said local online platform providers such as Shopee and Lazada will not resort to price adjustments if they act “purely as the middlemen” between traders and consumers.

Koong, who is chairman of ACCCIM’s small and medium enterprise (SME) committee, said the LVG tax aims to create a “level playing field” for local traders selling low-value imported goods.

“For example, physical traders in Sungei Wang (Kuala Lumpur) or the night markets were previously at a disadvantage, because they were subjected to the sales tax while online traders were not.

“The LVG tax will help create a level playing field for local physical traders,” he added.

As a result, he said, consumers may decide to buy their items locally instead of online, as their prices may be comparable now.

The charging and levying of the LVG sales tax took effect on Jan 1 for online local and foreign sellers, with total sales value of LVG brought into the country exceeding RM500,000.

Online traders will have to apply to be registered under the Sales Tax Act (Amendments) 2022.

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SME Association of Malaysia president Ding Hong Sing said overseas sellers on ecommerce platforms are expected to adjust their prices to cover the new tax due to a market slowdown globally.

“When the market slows, costs increase and the output lessens.

“For example, many producers in China have been facing increased overhead costs every year. Many had to cut down on operations time and staffing.

“With this new LVG tax, some who sell online to Malaysia take the ‘opportunity’ to raise their prices to cover the higher costs and business loans.

“In the end, consumers are the ones paying a higher price,” he said.

With overseas sellers generally having to increase their prices, Ding said local sellers should grab hold of the opportunity to diversify their products and attract buyers.

“Local producers and sellers will have the chance now to capture the Malaysian market.

“With a more level playing field now, it’s high time our fellow Malaysian producers offer better products to compete with their counterparts.

“Of course, the government must keep assisting these producers, who are mainly micro, small and medium enterprises, to go digital and adopt automation.

“It is only when our micro SMEs advance that more employers can pay higher salaries to skilled workers, resolving our long-standing structural issues involving wage and salary,” he said.

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