KUALA LUMPUR, Dec 18 — Malaysia’s Small and Medium Enterprises Association (Samenta) said today it welcomes the government’s 10 per cent tax on low value goods (LVG) bought from foreign marketplace platforms.

Its president Datuk William Ng called the tax a competition leveller and is confident it will boost local businesses.

We have been among the early proponents of this equalising tax and are grateful that the government is taking resolute steps to implement them, despite the strong lobby from the online marketplaces.

"For many years, our local retailers and online sellers, especially SMEs, are fighting an unfair competition against foreign sellers.

"While local retailers have to pay tax at various points of the supply chain, including when bringing in components or raw materials as well as finished goods into Malaysia, we are being undercut by foreign sellers and local dropshippers who have largely escaped from paying tax to Malaysia on their products,” he said in a statement.

The 10 per cent LVG tax will start January 1, 2024, after the Anwar government said it would give businesses more time to prepare.

The levy, to be imposed on all goods priced below RM500 bought from abroad, was initially scheduled to kick in from April this year.

The Customs Department defines LVG as all goods ― excluding cigarettes, tobacco products, intoxicating liquors, electronic cigarettes, and preparation of a kind used for smoking ― which are sold at a price not exceeding RM500 and are brought into Malaysia by land, sea or air.

The tax will also apply to local businesses selling LVGs on online platforms or online marketplaces with revenues exceeding half a million ringgit in a year.

This means sellers that were previously not required to register their business with the Customs Department, will have to from now.

Failure to comply will likely result in a penalty.

Samenta said online marketplaces should help facilitate the tax on both local and foreign sellers who have met the revenue threshold, and also prevent businesses from passing additional costs to local sellers.

"It's the social responsibility of these marketplaces to help support Malaysian sellers and made-in-Malaysia products, given the extensive regulatory facilitation, promotional support and financial aid given to them by various government agencies for many years,” Ng said.

Samenta said it hopes the tax would encourage people to buy more local products.

"We encourage Malaysians to buy from local retailers and sellers — not only in supporting our economy, but also better protect ourselves and our families from fraud and fire, safety and health risks,” Ng added.