Credit Card Service Tax -Overkill!

Credit card agents cried foul over service charge plan.
This is the first concerted backlash against the 2010 Budget to impose RM50 service charge for principal credit card holders.

On 30 October, 5,000 credit card agents and 18 credit card issuers through a joint press conference,urged the government to withdraw the tax proposal effective on 1 January 2010.Some of the representatives from over 40 sales agencies holding up credit cards showed their displeasure as their rice bowls are on the line.

Francis Teow, who runs a credit card sales agency in Penang, said banks would not be keen to maintain their large sales force if they were not confident of achieving the desired sales target when the RM50 tax is enforced.

As for the Government’s argument that the RM50 was seen as a way to encourage prudent use of finances, Teow said a better alternative would be to raise the interest on the minimum monthly repayment from the current 5% to 20%.

“However, the Government is well aware there are many cardholders with substantial amount of outstanding balances in their credit cards.

“And if they increase the monthly minimum payment, many will default payment and non-performing loans will increase,” added Teow.

Credit card sales agency director H.K. Tan said the service tax would not only have a negative impact on sales agents but also on card holders as well.

“The newly imposed service tax will affect low and middle-class consumers.

“Many can’t settle their outstanding bills, imagine having to fork out another RM50 for service tax,” he said.

Credit card consultant Kevin Choong said it was not viable to burden the industry that had done much for consumers with the new tax.

“Credit cards have reduced the need to borrow from loan sharks. Imagine, people who do not have credit cards to avoid paying the RM50 service tax, they may need to carry a lot of cash and they will become easy target for thieves.

“Or, if in case of an accident in the middle of the night and you need to be admitted into the hospital, the credit card provides you with financial security,” he said.

I think PM Najib is again ill-advised on this tax move just like what happened in the case of the RM10 billion Amanah Saham1 Malaysia unit trust.