The increase in the sugar tax is a step forward in the government’s ongoing efforts to curb the rise of non-communicable diseases (NCDs) among Malaysians, KPMG Malaysia said.
Its head of indirect tax Ng Sue Lynn told BusinessToday that this effort is evident in the proposed phased increase in the excise duty rates on sugary drinks starting from Jan 1, 2025.
“The increase in the sugar tax was widely anticipated and should not have been a surprise to the rakyat because overall, the proposed increase in the sugar tax is a pro-active and welcomed move but it remains to be seen how the increase rate in phases will be implemented
“Unless the manufacturers reformulate and reduce the sugar level in the drinks, the tax would translate to an increase in cost which if passed on to the consumers, would hopefully reduce sugar consumption and encourage consumers to make healthier choices,” Ng said, adding that the primary objective of the sugar tax is not for revenue generating, it is a tool used to increase the selling prices of sweetened beverage to discourage consumption.
“On that note, periodic review between tax policy and the national health objective is encouraged to be reviewed periodically to ensure the national health objective is achieved,” Ng said.
Budget 2025 was tabled by Prime Minister Datuk Seri Anwar Ibrahim in the Parliament yesterday and during the tabling, he announced several measures such as the review of the Sales Tax rate, an expansion of the Service Tax scope, the increase in excise duty on sugar-sweetened beverages, the 2% tax on dividends received by individual shareholders and the imposition of the carbon tax on iron, steel and energy industries.
As to why the highly anticipated luxury goods tax was not mentioned in the Budget 2025, Ng said although the tax was not specifically mentioned, the government has announced plans to increase the Sales Tax rates for non-essential items such as imported premium goods such as salmon and avocado.
“This could be an avenue to achieve a similar outcome as the luxury goods tax because once the increment is implemented, different Sales Tax rates may be applied to these premium goods based on their categories.
“However, specific details about this are yet to be announced by the relevant ministries or agencies,” she added.
As for the imposition of the carbon tax on iron, steel and energy industries, Ng said the tax could lead to an increase in production costs, which may then be cascaded down the supply chain.
“Consequently, these businesses would need to explore alternatives to reduce their carbon emissions because if the tax is modelled after implementations in other countries, it would likely be imposed on business facilities that produce greenhouse gas emissions,” she said while stating that the primary objective of the carbon tax is to encourage businesses to lower their carbon emissions by adopting low carbon technologies or switching to alternative fuel sources.
“The long-term goal is to accelerate the use of green technology and reduce reliance on non-renewable energy sources, which contribute to global warming and adverse climate impacts,” she added.
During yesterday’s tabling, Anwar, who is also the finance minister, said the introduction of the carbon tax on the iron and steel as well as energy industries by 2026 is aimed at promoting the use of low-carbon technologies, with revenue generated from this tax will be used to fund green research and technology programmes.
