SST To Impose RM25 Annual Tax On Credit Cards
The Sales and Services Tax (SST) which is set to roll out on the 1st of September, will have an impact on credit card holders. Credit card holders will be charged with an annual RM25 service tax, which is expected to contribute an additional RM225 million to the national revenue.
However, this could lead to a drop in the number of credit and charge cards being used, just as it did the last time such a tax was introduced. Back in 2010, an annual service tax was imposed on card holders, which saw a drop in the number of cards in circulation. The tax stood at RM50 for principal credit cards and RM25 for supplementary cards.
At the moment, there are at least 10.2 million credit cards and charge cards being used in Malaysia. Out of that number, 9 million cards are principal credit cards, 1.1 million are supplementary cards, with remaining being charge cards.
When the tax was scrapped with the introduction of the Goods and Services Tax in April 2015, the number of cards used immediately soared. In 2016, the number of cards in circulation was recorded at 9.3 million, followed by 9.99 million in 2017.
So will we see a drop in credit and charge cards usage starting September? According to tax advocate and solicitor Dr Choong Kwai Fatt, the RM25 tax translates to only 0.1% of users’ income, so it would not affect them all that much. The minimum annual income to obtain a credit card is RM24,000.
“Most of the credit card providers also have reward point systems and redeemable gifts. Using these points will offset the RM25,” he was quoted as saying. Dr Choong Kwai Fatt added that the RM25 service tax can also help users to prevent unnecessary spending.
The annual service tax of RM25 for credit and charge cards will be implemented starting September.