Malaysia will not automatically extend tax exemptions to other countries

New Straits Times

9 hours ago

KUALA LUMPUR: Any consideration of granting tax exemptions on agricultural products from countries other than the United States (US) will depend on negotiations and reciprocal offers that bring clear benefits to Malaysian companies.
Investment, Trade and Industry (MITI) Minister Tengku Datuk Seri Zafrul Abdul Aziz said the exemption of sales and service tax (SST) on agricultural products imported from the US was one of the outcomes of negotiations on reducing retaliatory tariffs imposed on Malaysia.
"In response to the question of whether such sales tax exemptions would also be granted to imports from other countries, the ministry would like to clarify that the exemption granted to the US was the result of concluded negotiations based on mutual interests.
"As such, any consideration of granting tax exemptions to other countries will depend on negotiations, requests and reciprocal offers from those countries, provided that it benefits Malaysian companies.
"If we were to extend tax exemptions to other countries simply because they were granted to the US, this would be a decision that must be carefully considered, particularly with regard to what was mentioned earlier about the World Trade Organisation (WTO)," he said in his winding-up speech on the 13th Malaysia Plan.
Earlier, Datuk Dr Radzi Jidin (PN - Putrajaya) had raised the matter, saying that under WTO rules, imported goods should be treated fairly.
Zafrul added that Malaysia is not alone in this situation, as many countries are also setting aside the principles of multilateralism under the WTO in order to protect their own economic and political interests.
"This is due to measures taken by the US that appear to be aimed at creating a new model of global trade, one based on prevailing geopolitical and geoeconomic agreements.
"The sustainability of these measures within WTO rules depends on their specific design and implementation.
"Decisions and commitments under the WTO, such as the Most Favoured Nation (MFN) treatment and tariff rates, establish clear parameters.
"Any exemptions, including those based on national security or public interest, are subject to interpretation and the WTO's dispute settlement mechanism," he said.
He added that MITI remains committed to complying with the various international trade rules currently in force.
In this regard, MITI will conduct a more detailed study and consult with the relevant ministries, particularly the Finance Ministry.
"Ultimately, we must uphold the principles of fair and equitable trade and avoid discrimination against any country, including our neighbouring states and especially those with whom we have Free Trade Agreements (FTAs).
"In our discussions with the United States, we ensured that the ministries involved, particularly the Finance Ministry in relation to SST, understood that under WTO principles, what is granted to one member must also be granted to others.
"This includes issues raised by the United States itself, which questioned why certain non-tariff barrier decisions applied differently to them compared with other countries," he said.
Zafrul said that within FTAs, such matters can be negotiated, but since the United States does not have an FTA with Malaysia, tariff-related issues fall squarely under WTO rules, as the US is also a WTO member.
"Here, tariff barrier issues differ slightly because the US is not part of any FTA with us.