Credit Cards Tax Waiver: Waiting for Godot

This is one interesting question: Will customers have to pay the RM50 service tax on principal credit cards or can it be absorbed by the banks that issue them?

Cardholders have been asking this question since the announcement of the service tax in the Budget last week. Banks are unable to give any as they await 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 certainly riled millions of 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 re-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.

There are operational issues on the implementation of this 'unhappy' tax.

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 canceling their card?

Whichever way you look at it, no government is going to allow an easy RM555 million slip through their fingers. Also, do not be gullible to expect 'money-grabbing' banks to absorb this hugh deluge of "indirect tax paying" for you!

As far as I can see it,start reviewing the cards in your wallets. If there are those that have to go, they will have to go. Do not wait for Godot.

Where are my scissors?