KUALA LUMPUR (July 29): Malaysia has officially scrapped its plan to impose a high-value goods tax (HVGT), a proposal that was first announced more than two years ago.

In a written parliamentary reply on Tuesday, the Ministry of Finance (MOF) confirmed that the government has decided not to proceed with the HVGT, previously known as the luxury goods tax.

"Nevertheless, the elements of the HVGT have been incorporated into the revamped sales tax regime, where luxury and discretionary items are now taxed at rates of 5% or 10%," the MOF stated.

The reply was in response to a query from Datuk Shamshulkahar Mohd Deli (BN-Jempol), who had asked about the projected increase in national revenue from the government’s fiscal reforms. These reforms included the proposed HVGT, a digital goods tax, a capital gains tax, a low-value goods tax, and the expansion of the sales and service tax or SST.

The HVGT was initially unveiled in the revised Budget 2023, which was tabled by Prime Minister Datuk Seri Anwar Ibrahim in February 2023. It was anticipated to carry a tax rate of 5% to 10% and was projected to generate annual revenue of RM700 million for the national coffers.

The government initially targeted May 1, 2024 for its implementation. However, the plan faced delays due to pushback from industry players, particularly those in the jewellery sector, who cautioned that a low threshold could severely impact the industry.

Despite shelving the dedicated HVGT, the MOF anticipates a significant increase in government revenue collection through a series of other new and expanded tax measures.

The capital gains tax, which came into effect on March 1, 2024, is projected to generate approximately RM800 million annually, based on the current volume and value of transactions involving unlisted shares.

The broadened scope of the SST, which took effect on July 1, 2025, is expected to bring in an additional RM5 billion in 2025, with this figure doubling to RM10 billion by 2026.

Regarding the LVGT, which was introduced on January 1, 2024, the ministry reported that it generated approximately RM500 million in revenue in 2024.

Although the government has not introduced a separate digital goods tax, the MOF pointed out that it has been imposing a service tax on digital services since Jan 1, 2020. This tax, levied on foreign service providers offering online services, generated RM1.6 billion in revenue in 2024.

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