KUALA LUMPUR: Reintroducing the goods and services tax (GST) will increase the government’s income, says the Malay Chamber of Commerce Malaysia (MCCM).
Its president Norsyahrin Hamidon said with GST, the federal administration would be able to use the extra income to provide assistance to those in need aside from spending the money on necessary development.
However, he said the MCCM proposed for the GST to be reintroduced at a lower rate of 2% this time around, instead of the previous 6%.
Currently, Norsyahrin said the absence of GST has led to RM500bil in tax leakages, which is equivalent to 30% of the country’s total gross domestic product (GDP).
“Unregulated shadow economic activities are not only harming the country and the people but it also contributes to the increase in corporate and commercial crime, as well as the country's failure to fight corruption.
“We propose firstly for the GST to be reintroduced at a 2% rate.
“Secondly, a big portion of the GST revenue collection should be returned to the people in the form of monthly cash aid.
“And third, we propose for the corporate tax for micro, small and medium enterprises (MSMEs) to be lowered from 15% to 10%,” he said during a media conference after a round table discussion at the MCCM office here Friday (Sept 8).
Norsyahrin said the MCCM is hopeful that the unity government would announce the proposed initiatives in the upcoming Budget 2024, which is scheduled to be tabled in October this year.
He said that the GST is recognised worldwide as the “most efficient tax regime” and it would only be logical to reintroduce it, adding that the government needed to understand issues haunting small businesses.
“We understand that some people might not welcome the idea of having the GST back, but the reason they have this perception is because they don’t understand the essence of GST and why developed countries adopted it.
“The irresponsible shadow economy (activities) are unfair to registered business owners who always adhere to their responsibilities by paying taxes.”
Norsyahrin added that while the MCCM understands the government’s struggle to pay off federal debts, especially due to the two-year lockdown caused by the Covid-19 pandemic, Putrajaya must also understand the plight of the business community.
He said the community was hit hard as the purchasing power of consumers continued to decline while the cost of goods was increasing.
“But at the same time, daily wage rates and salaries remained low.
“With the expected deficit rate exceeding 6% this year, we demand that the government continue to prioritise the welfare of the people by providing fiscal allocations that are more in line with their needs.
“For example, this can be done by setting a target of 5% of GDP for health expenditure in addition to optimising public and private healthcare services, which are now at a critical level,” he added.
Under the current sales and services tax (SST) regime, which has a narrow tax base, there is a tax of between 5% and 10% on the sale of goods, while services attract a 6% levy.
In comparison, the former GST regime covered a broader range of items and services with the rate set at 6%.
GST was introduced in April 2015 by former prime minister Datuk Seri Najib Razak but scrapped three years later during the Pakatan Harapan administration in 2018 under Tun Dr Mahathir Mohamad’s leadership.
