Credit cards for income tax payments could push users deeper into debt, consumer groups say

The federal government moved to allow Malaysians to pay their income tax using Visa, MasterCard or American Express cards from this year in a bid to improve the efficiency of the Inland Revenue Board collection. — Reuters pic
The federal government moved to allow Malaysians to pay their income tax using Visa, MasterCard or American Express cards from this year in a bid to improve the efficiency of the Inland Revenue Board collection. — Reuters pic

KUALA LUMPUR, March 6 — Most consumer groups have lauded Putrajaya’s introduction of credit and debit cards for income tax payments, but pointed out that the move could lead to higher debts for those who spend uncontrollably, especially the younger generation.  

The groups noted that the main issue was the potential overuse of credit cards, rather than debit cards, because it is harder to keep track of payments.

“Those who are in the middle-income threshold will definitely see an impact where their debt will keep on increasing,” Saravanan Thambirajah, vice-president of the Malaysian Education and Research Association for Consumers told Malay Mail Online in an email interview.

“Too often, poor management of debt is the primary reason for consumers to get into financial problems,” he said, adding that credit card payment was “ideal” only for those who are technologically savvy and had higher earning power.

While the younger generation of taxable workers were tech-savvy, he noted that many were not financially prudent and would likely be the most impacted by the too-easy alternative payment method.

“The current generation is really not worried about going bankrupt. AKPK statistics show every day at least 61 people go bankrupt below the age of 44 and one of the factors is the loss of control on their credit card usage,” he said, referring to the government’s Credit Counselling and Debt Management Agency by its Malay abbreviation.

Last October, national news agency Bernama reported that 58 per cent, just over half of Malaysians, who had been declared bankrupt in the first half of 2014, were under the age of 44.

De facto law minister, Nancy Shukri, was reported as saying then that high credit card debt was among the causes of insolvent Malaysians, though she cited personal loans and vehicle loans as the other two main problems.

Muslim Consumers Association of Malaysia chief activist Datuk Nadzim Johan also warned that although a credit card makes for hassle-free payments, it could add to the high-level of debt that Malaysian youths are currently facing.

“The idea is good, but I think it is not so safe for Malaysians, especially the younger generation.

“We have a problem with money management. I think we tend to forget and tend to be negligent with our financial responsibilities,” he said, referring to Malaysians in general.

Penang Consumer Protection Association president K. Koris Atan and Federation of Malaysian Consumers Association vice-president Mohd Yusof Abdul Rahman both echoed the sentiments, saying Malaysians generally have a poor track record with repaying their debts.

However, Koris said managing credit card repayments is an individual’s responsibility.

“The young guys will run wild with the money,” he said, referring to the high level of credit card debt among Malaysian youth.

The only consumer activist who believed using credit and debit cards for individual income tax payments was unnecessary is S.M. Mohamed Idris.

“There is already a system in place to collect the tax payment, so there’s no clear reason why they would want to do this,” the president of the Consumer’s Association of Penang told Malay Mail Online over the phone when contacted.

The federal government moved to allow Malaysians to pay their income tax using Visa, MasterCard or American Express cards from this year in a bid to improve the efficiency of the Inland Revenue Board collection, Bernama reported on Monday, citing Deputy Finance Minister Datuk Ahmad Maslan.