Sunday, November 1, 2009

Malaysian credit card tax: Banks await the guidelines

KUALA LUMPUR: Will customers have to pay the RM50 service tax on principal credit cards or can it be absorbed by the banks that issue them?

These are among the questions asked since the announcement of the service tax in the Budget last week but banks are not forthcoming with answers as they are still awaiting guidelines from Bank Negara.

The Association of Banks is expected to meet Bank Negara soon over the guidelines and to voice the concerns that have arisen from the RM50 service tax, which was first imposed in 1997 and abolished in 2001.

Meant to “promote prudent spending”, the tax – RM50 on each principal credit and charge card and RM25 for supplementary cards – has riled credit card users who on average have two to three cards. Some have more than half a dozen, including co-brand cards between banks and retailers, airlines and hypermarkets.

Bank Negara’s Credit Counselling and Debt Management Agency (AKPK) believes that the measure will encourage individuals to use the few credit cards in their possession instead of signing up for many but not using them all. It will also discourage the use of cards as a source of easy credit and reduce credit card debt problems.

There are currently 9.8 million principal and 1.3 million supplementary credit cards issued at the moment, according to statistics from Bank Negara.

Going by these figures, the Government stands to earn about RM555mil every year from the soon-to-be imposed tax.

As such, it is unlikely that banks will be able to absorb the service tax across the board and it would also defeat the purpose of getting customers to feel the pinch, says a banker.

Prime Minister Datuk Seri Najib Tun Razak, in response a question on complaints over the tax, said at a function yesterday that there were no immediate plans to revise the service tax as it was “too soon to talk about a revision”.

Among the questions on how the tax would be imposed are:

> Will the card holder be taxed RM50 per principal card on Jan 1 or only when his card is up for annual fee payment or renewal, which may, for example, be in September?

> If the cards are all issued by one bank, can the customer pay RM50 (per customer per bank) instead of per card per bank?

> How much time will those who need to settle their credit card debt be given to clear the outstanding amount before cancelling their card?

*Taken from The Star Online

*To download Malaysian 2010 Budget Speech, click here

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