Jewellers worried about luxury goods tax

Angie Tan

Gold jewellers are worried about the luxury goods tax affecting their retail sales as they say it is not just the rich who buy gold. – AFP pic, November 29, 2023.

JEWELLERS were concerned the luxury goods tax to be enforced May 1 would negatively impact the retail industry, operators said.

South Johore Golden Ornaments Trade Association chairman Soh Lip Sim said it was not just the rich who buy gold.

“I’m not saying no one buys gold to simply wear it. But more often than not, they buy it as an investment, not as a luxury item,” he said

He said it would be unfair for the government to tax gold as a luxury good.

Soh said in addition to affecting consumers, the luxury goods tax would affect local industries.

“Ninety percent of the gold jewellery we sell is produced locally. If the government insists on imposing a luxury goods tax, it may be detrimental to the development of the industry.

“For example, if the government’s tax threshold is RM10,000, in order to avoid being taxed, consumers will only buy jewellery below the threshold.

“Similarly, manufacturers will produce more cheap jewellery and abandon the production of expensive jewellery.”

He said the luxury goods tax would cause more intense competition among retailers as those focusing on high-end jewellery would push more items priced below RM10,000.

Soh, who is also LiTZ Goldsmith & Jewellery Sdn Bhd managing director, said due to high gold prices, the jewellery business has been lagging.

“Gold prices may be too high and the economic situation may not be ideal, and after the pandemic, there has been a period of retaliatory consumption. Now there may not be excessive consumption, which has affected our current business.”

He said, comparing the peak period (the period of retaliatory consumption after the pandemic) with now, the gold jewellery industry has slowed by 30%.

“We are located in Johor Baru so the situation is a little better due to our proximity with Singapore. The weak ringgit still attracts many Singaporeans to spend here, so our business is not so affected.

“However, my colleagues in the north said their business is quite bad,” Soh said.

He said the future of the gold jewellery industry depends on government policies and the economy.

On October 13, when Prime Minister Anwar Ibrahim presented Budget 2024, he said the government would enact a law to implement a 5% to 10% luxury tax on high-priced items such as gold jewellery and watches based on a price threshold.

Gold jewellers say a low-threshold luxury goods tax would ramp up competition in the low- and mid-end retail segments. – AFP pic, November 29, 2023.

Bleak prospects

Tai Yick Gold & Jewellery owner Lee Mun Fong said business has been greatly affected due to the economic downturn.

“If a luxury tax is added to that, it will worsen the gold industry … I’m afraid not many stores will be able to hold on,” Lee said.

She said business has plummeted by 60% to 80% recently.

On November 14, the Federation of Gold, Diamond and Jewellers of Malaysia (FGJAM) and the Indian Gold, Diamond and Jewelers Association in a joint press conference suggested the government raise the tax threshold to RM50,000 per item at a tax rate of 5%.

They said the profit margin of gold jewellery was very low, unlike other luxury goods, so if the government sets a low-threshold tax, the industry might be forced to pass it on to consumers.

FGJAM deputy president Pang Ann Puo said the two associations signed a memorandum of understanding and submitted it to the Finance Ministry, but said they have not received any response.

Pang said the purpose of the memorandum was to meet with ministry representatives to discuss the luxury goods tax.

On November 2, Anwar, who is also finance minister, said the luxury goods tax would be implemented next year.

He said policies and legislation were being formulated for the implementation system, rates and commodity types.

Anwar said the tax would be announced once the details were approved by the cabinet. – November 29, 2023.

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