KUALA LUMPUR — Oct. 3, 2019: The possible reintroduction of the Goods and Services Tax (GST) could be used as a stabilisation policy when the country’s economy faces strong headwinds.
According to Bank Islam chief economist Dr. Mohd. Afzanizam Abdul Rashid, any reversal of the current system from the Sales and Services Tax (SST) to the GST could buffer any downtrend impact and when the global economy faces a slowdown, an efficient tax system is needed to ensure that the local economy can face the pressure.
Reducing dependency on oil revenue
“It would be good in terms of increasing the government’s revenue, as relying on oil revenue is risky as oil prices are constantly in a volatile situation,” he told Bernama.
Afzanizam also spoke on the need for Petronas to increase its oil reserves, both domestic and overseas and emphasised the need to provide clear information in a transparent manner in order to avoid any misconception about the new economic policy currently being implemented.
Tax experts said that with the current crude oil price hovering between US$55 and US$65 per barrel, the 2020 Budget should be drafted based on this price range to avoid over-dependency on Petronas’ reserves.
Since last year, the benchmark Brent Crude had peaked at US$84 per barrel before sliding to US$53 in January and hovering between US$55 and US$75 until today.
View of new tax from business perspective
YYC Holdings Sdn. Bhd. CEO Datin Yap Shin Siang said it is undeniable that the GST is a more efficient system for businesses because under the current sales tax regime it becomes a cost to businesses whereas under the GST it is claimable as input tax.
“We also suggest several improvements in areas such as simplifying the tax codes and reporting system as well as speeding up the refund process,” she said.
Both Afzanizam and Yap agreed that the GST could start at a lower rate than the previous six per cent, possibly at three per cent.
Prime Minister Tun Dr. Mahathir Mohamad said today that the government may consider reintroducing the GST, which was abolished last year.
“If that is what the people want, we will review it if it is better than the SST,” he said, but added that it may be too late to reinstate the tax in the 2020 Budget to be tabled this month.
The GST was introduced in April 2015 at six per cent before it was abolished and replaced by the SST on September 1, 2018.