Reinstating GST will bolster government revenue, but more clarity needed - economists


KUALA LUMPUR: Bringing back the goods and services tax (GST) will bolster government revenue but more clarity is needed for market players to adjust their investment decisions accordingly, say economists.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said while it makes sense for the government to reconsider the GST as the tax regime would boost revenue collection, it is also important to make the system more transparent.

"Perhaps making it more transparent is the best way to deal with the shadow economy, as all businesses will need to register to claim the input tax credit,” he told Bernama.

Economy Minister Rafizi Ramli reportedly said yesterday that the government is open to reintroducing the GST as one of its strategies to widen the revenue base to achieve fiscal sustainability.

"We will be open and go through whatever way we can to achieve fiscal sustainability through a wider revenue base, whether it is going to be capital gains tax, GST, or any other form of direct or indirect taxes.

"I prefer to keep that strategy open and we will decide on a case-to-case and year-to-year basis," he told reporters after the tabling of the 12th Malaysia Plan (12MP) mid-term review by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim in Parliament yesterday.

Bank Islam Malaysia Bhd chief economist Firdaos Rosli reckons more clarity is needed from the government as market players need to be prepared and adjust their investment decisions accordingly.

"The idea to reintroduce the GST could be more precise concerning the timeline and the tax design. I suppose economists and the business community can anticipate things better if there is clarity on this issue,” he said.

Asked about what would be the ideal new GST rate compared to the 6 per cent implemented previously, both Afzanizam and Firdaos were non-committal.

"Not sure what (would be the right) rate, but they can always start small and increase it over time.

"But if they can pull this off, it would be a major plus point for the current administration,” said Afzanizam.

Firdaos said it is still premature to discuss the rate for now because the decision to revive the GST is still inconclusive.

A GST of 6 per cent was introduced in 2015 but it was abolished in 2018 and replaced by the sales and services tax (SST). - Bernama

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