live in Malaysia and I have something to share with you. Have you heard of credit card tax? Nope... I'm not talking about the credit card annual fee, it's a tax that you pay to the government for every credit card that you hold. I'm wondering if there is such tax in any other countries. Well, here is the story...

The Malaysia government says they are going to charge a service tax of RM50 (~US$15) for each main credit card and charge card, and RM25 (~US$7.50) on supplementary cards because they want to encourage prudent spending.

Do you have a credit card? How many do you have?

Well, I have a total of 4 principal credit cards, 1 supplementary card, and they are all free of charge, meaning no annual fees. I use credit cards because they are convenient as I do not need to bring too much cash out. It's also for safety purposes as it's not safe to bring too much cash with you! Don't you agree?

I pay off all my monthly outstanding balance in full and on time so there will be no interest fee or late charges. I get rebates or rewards point from using my credit cards. So, I'm actually getting money back!

If the government now charges a service tax of RM50 for each primary card holder and RM25 for each supplementary card, I'll have to pay a total of RM225 per year when I'm paying nothing before! How can this encourage prudent spending? This is unnecessary tax! Perhaps the credit card issuers may decide to bear the tax burden for high spenders, but still the government should not impose this tax!

According to Malaysian Rating Corp Bhd (MARC), should the tax be implemented as proposed and the effective tax burden fall on the cardholder, the more likely consequence would be a reduction in the number of issued cards, as most cardholders will cancel extra cards to minimize their tax burden since the tax is proposed to be levied annually on a per card basis.

If there is such service tax on each of your credit card, what will you do?

I will cancel all my extra credit cards and only keep one credit card. Credit cards are now a necessity rather than a choice. You need them for hotels booking, flight booking, online purchase etc. With just one credit card left, will this lower my spending? No! I still need to pay RM50 service tax for the single credit card. It will cost me trouble to switch my insurance payment or loan to a single credit card.

The government does not need additional revenue of RM555 million from the proposed credit card charge (11 million credit cards in issue in Malaysia). There must be much better way to "encourage prudent spending" and to reduce credit card debts.DAP has urged the federal government to withdraw its budget 2010 proposal to impose service tax on credit cards and charge cards as there is already adequate revenue for next year. View the video below: