RM50 service tax for card holders

SERVICE tax of RM50 will be imposed on each principal credit card every year beginning Jan 1.

For every supplementary card, a RM25 service tax will be charged yearly.

The move to impose this tax is to promote prudent spending as the use of credit cards is extensive. The number of cards increased from two million in 1997 to 11 million as of August this year. They exclude the 285,000 charge cards already issued.

Muslim Consumer Association of Malaysia secretary-general Datuk Dr Ma’amor Osman said it would encourage consumers to limit the number of credit cards they hold.

“Instead of having five or six credit cards, it will encourage consumers to reduce their cards to only one or two because it will be costly to pay service tax, interest, finance charges and so on,” he said.

Penang Consumer Protection Association president K. Koris said the service charge would not deter people from continuing to use their cards.

He added that the Government should instead re-look at imposing a restriction for credit cards and allow only those earning a minimum salary of RM5,000 a month to qualify for cards.

KPMG partner Ooi Kok Seng said the RM50 service tax would burden the lower income group but many would continue applying for multiple credit cards as they depended on the credit facilities.

He added that a significant number from the lower income group paid their credit card bills via installments and would not be able to write off the cards immediately.

Meanwhile, in a statement, the Penang Chinese Chamber of Commerce urged the Government to review the proposal as it would hinder domestic spending.

It suggested that the Goverment impose service charge on the second and subsequent cards.

Meanwhile, office clerk S. Siva, 48, plans to return eight of his nine credits on Monday morning.

“I definitely won’t be able to afford the service charge if I keep all my nine cards,” he said.
Siva said although he had nine cards, he only used one and only signed up for the rest after being told that all fees would be waived for life.