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Malaysia plans to resolve LME tax issue before April: Deputy finance minister
[KUALA LUMPUR] Malaysia plans to reach a solution with London Metal Exchange (LME) over a new goods and services tax on metals traded or stored in the country's bonded zones before an April 1 deadline, the deputy finance minister said on Tuesday.
The LME said last week it may stop issuing warrants - legal documents for stored metal - for stocks in Malaysian warehouses from July if it does not get clarification from the government over its planned tax reforms.
"We understand some of the issues raised, and we will definitely be working closely with them (LME) to look into resolving the problems, so we can enable them to growing further in Malaysia," Deputy Finance Minister Chua Tee Yong told Reuters after a meeting between LME, Malaysian customs and finance ministry officials.
"It would seem that we have to work within this one week," he said after the meeting in capital Kuala Lumpur, referring to April 1 when the tax is due to take effect.
To be approved as a good delivery point in the global LME storage network that stretches from Europe to Asia, a location must meet certain conditions, including no taxes on transactions for metals held in warehouses or on storage charges.
On Thursday a senior official at Malaysia's Customs Department told Reuters the government was looking at two options to neutralise the impact on metals inventories of the 6 per cent GST (Goods and Services Tax).
An official announcement will be made after ironing out all of the remaining details brought up by LME, a second finance ministry official present at Tuesday's meeting said.
"We have resolved most of the issues and there's just a few grey areas left to be worked out," said MA Sivanesan, deputy under-secretary of the tax division in the finance ministry.
The LME declined to comment.
Malaysia holds more than 430,000 tonnes of LME registered metal, including nearly half of the LME's nickel stocks, 85 per cent of its tin, one third of its lead and almost one fifth of its copper.
In a flurry of panic after the LME announcement, owners cancelled almost 50,000 tonnes of LME copper inventories, giving notice they were ready to ship metal out of warehouses in the Malaysian ports of Johor and Klang.
Mr Chua said the Malaysian government is aware of the "key role" that LME plays in metal trading in the region.
"We are happy to say they have grown Malaysia as an area for storing these metals stocks to become a key role in Asia," Mr Chua said.
"The government would like to continue to help LME to grow further in Malaysia."