PETALING JAYA: The goods and services tax (GST) should only be revived if accompanied with a clearer mechanism, economists say.
Bank Muamalat Malaysia Bhd chief economist and social finance head Mohd Afzanizam Abdul Rashid said the explanation must include plans by the government to use the extra income such as distributing the unity government’s cash aid, Sumbangan Tunai Rahmah (STR).
“GST would be an effective tool to address the shadow economy as businesses would be incentivised to register with the relevant authorities in order to enjoy the input tax credit, which can help reduce their tax liability.
“Also, the government needs to ensure the implementation would be more seamless especially in areas relating to Input Tax Credit and confusion over the categorisation such the standard rated, exemption and zero-rated mechanism,” he said.
On Wednesday, MCA president Datuk Seri Dr Wee Ka Siong urged Putrajaya to bring GST back with several improvements such as an exemption list, zero-rated supply and giving financial aid to the poor with increased government revenue.
Professor Dr Mohd Nazari Ismail from Universiti Malaya’s Business and Economics Faculty said that reintroducing GST would increase the government’s revenue which will increase the spending to help the underprivileged groups.
“Reintroducing GST can help the government spend money to improve public services in specific sectors such as education and health,” he said when contacted.Nazari, however, said that GST can only be seen as a short-term measure and the government must seek a long-term solution to resolve problems involving the cost of living.
“One essential aspect of the long-term solution is eliminating the debt-based economic system as such where banks create new money whenever they lend to borrowers, with an equity-based financial system,” he said.
SME Association national president Ding Hong Sing said he welcomed proposed plans to reintroduce GST as long as the government makes improvements into its refunds mechanism.
“The plans to reintroduce GST to generate revenue is not an issue for the SMEs, but we need a better system on the refunds,” he said.
Meanwhile, the Penang Malaysian Trades Union Congress (MTUC) were reported to have called on the government to put a stop on any plans to revive GST in the upcoming Budget 2024 as it is only practical for the country’s economic growth when the public is provided with better salaries. An economist at Tun Abdul Razak University, Prof Barjoyai Bardai said the government can also look into alternative taxation mechanisms.
“The World Bank and International Monetary Fund (IMF) report showed that Malaysia’s tax ratio in relation to GST is low at 11%, compared with other developed countries at 20%, so there are avenues for us to impose more tax.
“But we need to be careful when trying to emulate other developed countries in taxing the public when the salary rate in Malaysia has not gone up in tandem with inflation,” he said.
