Kota Kinabalu: The Federal Government needs to review the taxation policy on Labuan that has dampened its economy.
Parti Gagasan Rakyat Sabah (Gagasan Rakyat) Vice President Datuk Masiung Banah said Labuan would continue to lag behind the economic mainstream if the Government did not fully restore the island’s tax-free status.
Although Labuan is known as the most important international offshore financial centre in the region, he said the island now merely looked like an “old town.”
“Labuan was once a famous holiday destination with cheap duty-free shopping malls, but now it has turned into a sluggish town,” said Masiung, who is also a Kuamut Assemblyman.
He said Labuan no longer attracted visitors because the price of goods was higher than other states in the country.
“Labuan’s status as a duty-free island has been further eroded following the Government’s introduction of tax on tobacco products, cigarettes and alcoholic beverages since January 1, 2021.”
He said only snacks such as chocolates, sweets and crackers were now exempted from tax and the prices were almost the same in Sabah.
“Labuan is gripped by sluggish economic problems. The main reason for the high price of raw materials is the cost of transportation.
“This is because almost all consumer goods are transported from mainland Sabah by road and then cross the ocean on a ferry from Menumbok,” he said.
Masiung said most of the cargoes from the peninsula and overseas were sent directly to Sabah, causing investment in Labuan to continue declining.
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