Are things mahal because of tariffs, duties or taxes? Here’s a simple guide.

Have you ever seen the news, heard people talking about the budget, or come across some economic related videos while scrolling on TikTok?

Then you might have heard of scary financial terms like the tariff increasing, goods being subject to import duty, or the government imposing a new tax.

As of July 9, Malaysian goods exported to the U.S. are already subject to a 10% tariff. But if no deal is reached by August 1, that willjump to 25%.

But… What is the difference between these three things? Aren’t they all the same? Whenever the government takes our money, that’s taxes right?? After some research, we got the answer: No. Even though they all seem the same in spirit, they’re actually different things…

Tax: The thing we all know and “love”

Okay, nobody really gets excited about taxes. But like it or not, tax is kind of a big deal. It’s basically how the country keeps its lights on.

In the simplest terms, tax is the government’s main source of income. It’s collected from people like you, me, and companies doing business here. And while it may sting a little when you see that deduction in your payslip, the money doesn’t just disappear into a black hole. It gets used for things we all benefit from… like schools, hospitals and roads.

And subsidies and financial aid, too. So in a way, it’s like a boomerang where you pay, but eventually, it comes back to you in the form of public services and support. Win-win… kind of.

There are two types of taxes in Malaysia:

Direct tax. This one’s upfront and personal. You pay it straight to the government whenever you make money, and you’ll probably be aware of it. The most familiar type? Income tax. If you earn above a certain amount, you’re expected to file your taxes. You have to do e-fillings and pay based on your income bracket. Then there’sReal Property Gains Tax (CKHT). Sell a house or land and make a nice profit? Okay but just remember a portion of that gain goes to the government.

The second one is more sneaky, the indirect taxes. You usually pay this without really thinking about it. We’re talking about Sales and Service Tax (SST), currently at 6%, which replaced the previous GST. This tax is included into the price of your fast food meal, or your weekend retail therapy haul. You don’t pay it directly to the government; businesses collect it on their behalf.

Duty: The VIP Tax for Certain Goods

So you’ve heard about taxes, right? Now let’s talk about duty. No, not the kind where you wash the dishes without being asked, but the kind that shows up when you’re importing fancy gadgets or buying a can of soda.

Duty is basically a type of tax, but it’s more selective. It only applies to certain goods, especially when they’re crossing borders. So, if something’s being brought into Malaysia (imported), sent out (exported), or is a specific item that falls under this tax, you might see a duty charge.

But duty isn’t just about collecting money for the sake of it. It actually plays a big role in controlling trade, boosting national income, and protecting local businesses from being “buried” by giant international brands. 

There are three types of duties imposed in Malaysia, namely Import Duty, Excise Duty and Export Duty.

Well, if you’ve ever tried importing a car, electronics, or even trendy clothes from abroad, these are the examples of it. Import duty is charged when goods are brought into Malaysia. 

Why do we have it? Umm, one reason is to avoid flooding the market with foreign goods, which could hurt local producers. It’s also there to make sure we support homegrown industries. For example, imported cars are expensive due to import duty, so people might consider cheaper local cars like Proton and Perodua.

Excise duty is all about lifestyle choices. It applies to items that are either seen as luxurious or potentially harmful. We’re talking about sugary drinks, cigarettes, alcohol, and cars.  

Also, by controlling the use of these goods, excise duty also helps reduce the negative impact on society. In the case of cars, this duty is imposed so that local vehicles such as Proton and Perodua can compete with imported cars, especially from Japan. 

Which explains why JDM cars are sooooo mahal. Image from Tennen-Gas@wikimediacommons

Not everything we export gets hit with this tax, but some key items do, like palm oil and petroleum. Export duty is charged to control how much of these goods leave the country, so we still have enough for our own needs and can maintain good prices globally. 

Tariff: That thing everyone’s been talking about.

You might remember the day the world collectively raised its eyebrows when then U.S. President Donald Trump dropped the infamous tariff list aimed at countries all over the globe.

So, what is a tariff? In simple terms, a tariff is a tax, but with a passport. It’s specifically imposed on goods and services that are imported into a country.

And what is the tariff for?

Let’s say foreign products are flooding the market, and they’re cheaper than what local businesses can offer. That’s a problem. People will obviously go for the cheaper option. So to give local producers a fighting chance, the government can impose tariffs on those foreign goods. This makes them more expensive, and people will buy local stuff again. No local businesses go bankrupt lah basically.

Sometimes, if another country decides to charge high tariffs on our goods, we can return the favour. This is what happened during the trade war between the United States and China. The two countries impose tariffs on each other until even investors get dizzy.

So, the difference between tariff and duty? Think of it like this, duties are more about what’s happening inside a country. Based on internal tax laws, it often applied to certain goods for reasons like health, luxury, or local protection.

Tariffs, on the other hand, are the international version. They’re tools used in global trade policy, often as part of negotiations between countries or trade blocs.

To understand more easily…

Let’s say you have a business selling laptops and you import laptops from China.

The original price of a laptop is RM1,000.

When the goods arrive in Malaysia, the kastam will impose a 10% import duty (example only). So you have to pay RM100 duty.

Now, the actual cost for you to bring in a laptop is:

RM1,000 (original price) + RM100 (import duty) = RM1,100

Coincidentally, laptops have tariffs. So you have to pay another 15% tariff:

RM1,100 (original price + duty) + RM150 (Tariff) = RM1,250

Then, when you sell a laptop for RM1,250. This price will be subject to sales tax (SST) of 6%.

So your customers will pay:

RM1,250 + RM75 (SST 6%) = RM1,352

The conclusion:

Your cost for one laptop = RM1,250

Customer pay = RM1,352

Mind you, this is just a rough example. This price would be like if you were running a charity and were not making any profit from selling these at all. In fact, electrical goods are not subject to duties, but you can check what goods ARE affected at this link.

Tariffs, duties & taxes, they’re totally in your life

You might not think about it every day, but here’s the truth bomb, tariffs, duties, and taxes are all part of your daily life. They’re hanging out in the background, affecting your paycheck, your shopping habits, and even your online parcel from overseas. There’s always a little “cut” going to the government.

So, the next time you’re hearing it again, you won’t have to sit there with that I-have-no-idea-what-this-meansface. Because here’s the thing, these aren’t just boring economic terms you hear in the news, they actually have a real impact on prices at the supermarket, your cost of living, your salary, and even how a business runs.

The more you know, the less confused you’ll be. It helps you see why prices go up, why the government makes certain decisions, and how the country’s economy moves.

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