Time for low-value goods tax on online marketplaces, says trade group

The Small and Medium Enterprises Association of Malaysia says the low-value goods tax will address any tax disparity between brick-and-mortar stores and online marketplaces.

PETALING JAYA: A business group has called for the implementation of the low-value goods (LVG) tax, which was indefinitely postponed, to mitigate the “uneven competition” between brick-and-mortar stores and online marketplaces.

Small and Medium Enterprises Association of Malaysia (Samenta) president William Ng said introducing the tax would be a significant step towards creating a level playing field.

“Our small and medium enterprise (SME) sector is handicapped and competing unfairly against these foreign-owned online marketplaces.

“While local retailers have to pay taxes, rent and overheads, online sellers often avoid their tax responsibility and tend to pay lower rent and overheads, if any,” Ng told FMT.

He said the tax would address any tax disparity between brick-and-mortar stores and online marketplaces, adding that this was essential for the survival and growth of local SMEs.

“By imposing the same tax on everyone, we are ensuring that the prices of both take the same tax into consideration.”

The LVG tax was first mooted by then finance minister Tengku Zafrul Aziz when tabling the 2022 budget.

Then deputy finance minister Shahar Abdullah had said the tax would level the playing field between online sellers inside and outside Malaysia, empowering local markets and businessmen.

However, on March 14, the customs department announced that the 10% LVG tax would be indefinitely postponed with the date of implementation to be determined later.

Malaysia Retailers Association deputy president Law Boon Eng agreed with Ng, saying online shopping platforms have inherent tax and compliance advantages over physical stores.

“While merchandise in physical stores is taxed, online platforms may circumvent these obligations,” he said, adding that physical stores are required to charge for plastic bags and make payments to local councils, obligations not shared by online marketplaces.

Last week, acting domestic trade and cost of living minister Armizan Mohd Ali said online markets available on platforms such as TikTok had created “uneven competition” with businesses in physical premises.

In a written Dewan Rakyat reply, Armizan said the imbalance came from the significantly lower prices of goods and services offered online.