Malaysian Women Tourist Guide Association chairwoman, Erina Loo (left) with MOTAC Industry Development Division (Setiausaha Bahagian) S.Mohanasundari (3rd from Left) taking part at the Backyard Bohemian programme in conjunction with the 15th MWTGA anniversary celebration at Central Market Annexe on February 15 .-AZMAN GHANI/The Star
PETALING JAYA: While the government is not bringing back the Goods and Services Tax (GST) anytime soon, economists say there is no running away from imposing this type of consumption tax as they feel that Malaysia needs to broaden its tax base and revenue streams.
Economists opine that GST should be revisited, perhaps as soon as next year, when there is more political stability and public awareness of the matter, and an improved economy.
Prof Dr Yeah Kim Leng – one of the five members of a special advisory body set up to advise Prime Minister Datuk Seri Anwar Ibrahim as Finance Minister – said ruling out GST for the time being is in line with Anwar’s earlier stand that it will only be implemented after the new government has stabilised and ministers better acquainted with the inner workings of the civil service.
“More importantly, GST should be implemented only after public finance governance and integrity is firmly established.
“Then the public will be more willing to pay higher taxes in return for more prudent and effective government spending,” he said when contacted.
Prof Yeah, who is with Sunway University, said the focus on targeted subsidies and support for low-income groups and the strengthening of governance this year will help to set the foundation to reintroduce GST next year, especially if global and domestic economic and financial conditions are not fraught with risks and uncertainties.
In the meantime, the alternative to increase tax collection will be by improving the efficiency of tax administration through lower tax evasion and avoidance as well as simplifying rules and regulations to reduce the size of the informal sector, he explained.
He added that expanding business and individual tax bases are also ongoing efforts that could be amplified to increase tax collection.
Prof Dr Chung Tin Fah of HELP University said consumption tax such as GST or Value-Added Tax (VAT) is the way forward for the world as countries concerned about competitiveness and cost of doing business have lowered their corporate tax.
“The word GST sounds bad but the government cannot run away from the consumption tax.
“The world as a whole is moving towards that and Malaysia’s taxation policy needs a reform.
“Malaysia has been relying on commodities such as petroleum tax but it is not sustainable and feasible in the long run,” he said.
Prof Chung said countries such as India and Bangladesh, where the per capita income is lower than in Malaysia, have implemented GST with exemptions given to the lower-income group.
“It’s because the trend in taxation is towards indirect tax like consumption tax while lowering corporate direct taxation,” he said.
The GST issue, he said, must be seen for what it is – an economic issue to reform the taxation policy of Malaysia, and not a political issue.
Prof Chung said the GST should be revisited in the future when the issue is less politicised, the population is more educated about it and the economy is doing well.
To offset the imposition of GST on those in the B40 income bracket, he suggested giving aid or vouchers, such as that implemented in Singapore.
“A form of consumption tax on the T20 and M40 could also be devised to broaden our tax base. Perhaps the focus will be on the carrot rather than the stick,” he added.
Ahmad Yazid Othman, a member of the National Cost of Living Council (Naccol), said reintroducing the GST next year would at the very least allow time for the collection of sufficient data on spending.
“For now, a huge size of the black economy is hidden and able to evade valuable tax for the country.” he said.
Ahmad Yazid also suggested renaming GST as Prosperity Tax.
“It can begin at 1% to help reduce the government’s subsidy. It’s better than increasing the overnight policy rate (OPR), which benefits banks, to reduce spending and manage inflation,” he said.
On Tuesday, Anwar said Malaysia has no plans to reintroduce GST or any other broad-based consumption tax and the government will instead look to reducing subsidies enjoyed by the wealthy.
The GST was cancelled when Pakatan Harapan formed the government in 2018 as the coalition had campaigned on the promise to abolish the unpopular tax, which was first introduced by the Barisan Nasional government in 2015 at 6%.
