Professor Jomo Kwame Sundaram
KUALA LUMPUR: Malaysia may need to consider a modified value added tax (MVAT) as it needs to devise systems to suit the present times and ensure future sustainability in finances, says Professor Jomo Kwame Sundaram, an economist and research adviser at the Khazanah Research Institute.
This is less than 10% of the workforce are paying taxes at the moment, according to government data.
“Rather than going back to the goods and services tax (GST) we should go for the MVAT. With this, basically the strengths of GST collection could be incorporated into this quite easily,” Jomo said at the National Tax Conference 2023 today.
“Many companies are already prepared to pay online in a fairly decent system. But we also need to ensure that (any) new consumption is not as onerous as it is right now. This is more appropriate for the present time,” he added.
Jomo also said the strengths of the computer systems that were developed for the GST could be harnessed together with the less regressive elements in the previous consumption tax.
“Eating out for example has become a necessity these days and is not a luxury for middle class folks,” he said, implying that food items or restaurant bills be exempted from any future consumption tax.
Jomo also said that collection from any future consumption tax should be simplified and not be housed under the Customs Department, as it was done when the GST was introduced.
"When we had GST, it was not collected by the LHDN (Lembaga Hasil Dalam Negeri) but rather by customs because we wanted to keep them happy. It is better done under one roof (by LHDN). Tax intelligence data is better when we don't separate a company's account," Jomo said.
"Transfer pricing can happen when a company can put any kind of numbers into your book-keeping process - there must be a deterrent for this. Consumption taxes are neutral at best and regressive at worst," he added.
