KUALA LUMPUR – Insisting that their goods should not be subjected to the new tax, stakeholders in the gold jewellery industry argue that gold is an asset, not just a luxury item, and thus should be exempt from the proposed high-value goods tax (HVGT).
The Federation of Goldsmiths and Jewellers Association of Malaysia (FGJAM) deputy president, Pang Ann Puo, revealed that the association, alongside the Malaysia Indian Goldsmith Jewellers Association (MIGJA), issued a joint press statement to the Finance Ministry in November of last year, stressing the adverse effects of the HVGT on the industry.
“As prominent associations in this industry, FGJAM and MIGJA have proposed to the Finance Ministry, through a formal statement, the necessity of organising a dialogue session to discuss suitable business schemes,” he said.
Sighted by Scoop, the statement underscored some key points, including gold as an investment, its role as an emergency fund for B40 income groups, and customers diverting to cheaper sources in Singapore.
Pang said that the association remains committed to addressing this issue and intends to send another statement after the Hari Raya Aidilfitri celebration.
He also proposed setting the optimal threshold price for gold at RM100,000 with a 5% tax rate.
He further said that customers would likely shift towards purchasing lighter gold items based on what they could afford rather than larger grammes if a tax were imposed.
Possible jewellery shop closures
Johra Jewels marketing executive Muhammad Amar Ashraf said the HGVT would affect everyone across the board, and many jewellery shops might close operations due to possible bankruptcy.
This is because the imposition of the tax has caused owners, distributors, and suppliers in the gold trade to feel pressured by it.
“Since our economy is still sluggish, it could potentially result in the closure of numerous jewellery shops and subsequent losses.
“This ‘double layer tax’ could potentially cause a surge in the gold rate, possibly reaching RM350 from its current level of around RM330,” he said.
He said that a tax rate of about 2% is more suitable compared to the proposed 5% to 10% HGVT rate.
Goldsmith Ariff A.R. Abdul Wahab, 28, from AR Razak Gems and Jewels in Brickfields, said that the tax will affect sales, especially during the current weak economic situation.
He said the Goods and Services Tax (GST) – which was previously in practice – had resulted in a decline in business by approximately 30-40% during its implementation.
“The proposed tax rate of 5% to 10% for the HGVT is higher than the previous 6% GST rate.
“This will have a significant impact on the current economic situation and will put pressure on us, the jewellers, to generate higher revenue,” he added.
Ariff said that gold is not merely a luxury item; rather, it is purchased by individuals across all income brackets as a means of saving and investment for future needs, including emergencies such as medical and educational expenses.
Unlike gemstones, such as diamonds and rubies, which are luxury items.
“Those purchasing gold are often not financially strong, rather, they view gold as a form of savings with the potential for profit through resale should prices increase.
“If the government imposes tax on gems and branded products such as watches and handbags, then it is valid (to practise HGVT),” he said.
He also suggested that the government could set the tax rate at 2% or 3% for gold and 10% for gems.
“The price of gold has doubled in the last five years, reaching its peak today (March 29) at RM 334 per gramme.”
“It is illogical to impose taxes on gold items, even in small quantities, as customers would end up paying significantly more due to the tax alone,” he said.
It is not a “massive” effect, but it is unnecessary
However, another jewellery store employee said that this tax imposition would not have a significant impact and that customers would still come to purchase gold items.
Phebe Beddu, 40, from Joyalukkas in Masjid India, said that customers would continue to buy jewellery for special occasions such as weddings and festive seasons, regardless of the tax, including GST in the past.
“Last time, even when GST was introduced, people still came and bought it, especially for special occasions and weddings.
“During GST, buyers from foreign countries could still claim 4.5% from the 6%, so there was no loss to the business,” she said.
However, she said that the tax is unnecessary because nobody, especially the lower-income group, will end up paying “double tax.”
She suggested that the government could set a threshold price at RM10,000, reasoning that those who purchase more jewellery can afford to pay the tax, while acknowledging that there are also customers who buy smaller jewels for saving purposes.
“Why impose a tax on gold at all? People invest in gold, so why should the government restrict it by introducing a tax?” she asked.
Why more tax?
People are enraged by the never-ending taxes and financial burdens imposed on them, especially now with the HGVT, which appears to curtail their ability to purchase gold jewellery.
Suppaiah Veerappan, 78, said gold buyers are already charged for the workmanship of the gold they buy, in addition to the gold price.
“So why additional charges in the form of HGVT? There are numerous other taxation methods, and given that gold is a freely traded commodity, it should not be burdened with taxation,” he said.
Suppaiah said that saving gold is a longstanding tradition in the Indian community. However, imposing a tax on gold would pose significant challenges for the majority of Indians in the B40 income group in this country.
“Many Indians in the B40 income group do not prioritise saving money; instead, they invest in gold.
“This has been practised for centuries, reflecting a cultural preference for gold as an investment over monetary savings,” he said, noting that 916-hallmarked gold remains the primary choice for the Indian community due to its higher resale value.
Another gold shop patron, who wants to be known only as Anushri, said that Malaysia, despite being a developing country, understandably requires taxation by the government due to the ongoing economic slowdown.
However, Anushri argues that taxing gemstones, which are primarily purchased by the higher income bracket, would provide a more valid rationale for the HGVT instead of levying taxes on every gold item purchase.
“Those who purchase diamonds and rubies aren’t acquiring them as investments, unlike gold, which retains resale value.
“The higher income group could be taxed on other luxury goods but not on gold, which is preferred to be purchased by everyone,” she said.
The HGVT was initially scheduled to be implemented on May 1, 2024. However, the implementation has been deferred, as confirmed by Deputy Finance Minister Lim Hui Ying, who said that the government needs more time for engagement with industry to refine certain matters related to the tax structure. – March 31, 2024