Business

Tax accountants want government to reintroduce GST

Datuk Abdul Aziz Abu Bakar

TheMole
Written by TheMole

KUALA LUMPUR, May 12 2020: The Malaysian Association of Tax Accountants (MATA) has asked the government to consider bringing back the Goods and Services Tax (GST) to help rejuvenate the economy.

Its president Datuk Abdul Aziz Abu Bakar said such a move could ensure sufficient funds for the country as revenue from income tax is likely to decrease due to the impact of Covid-19 pandemic on the economy.

He said the government may have sufficient funds to cover operating expenditure for now but not for development expenditure.

“As such, it needs to look into increasing its income in order to ensure the economic activities can go on to help the people and nation recover. 

“Therefore the government ought to look at other avenues including calls for tax reforms. It may not be politically popular but it would help with economics.

“The government may want to consider reintroducing GST, but at a lower percentage at say three per cent. This way, everyone will be contributing a bit to help to strengthen the government’s fiscal position,” said Abdul Aziz in a statement today.

He also pointed out that the GST is a more broad-based tax system compared to the current Sales and Services Tax (SST).

“In the Malaysian context, GST is a cradle-to-grave tax that would cover 60 per cent of the Consumer Price Index (CPI) Basket of Goods and Services, as compared to SST that is taxable on only 38 per cent of the CPI Basket of Goods,” he said.

The GST was introduced in Malaysia by the government led by former prime minister Datuk Seri Najib Razak on April 1, 2015 . It was set at a tax rate of six per cent to replace the SST tax regime.

It was scrapped when the Pakatan Harapan government took over in 2018, and replaced by the SST on Sept 1 that year with a six per cent service tax and a sales tax at a range of five to 10 per cent.

Abdul Aziz said the government could also potentially increase its revenue by tackling the “shadow economy” or black market valued at an estimated RM300 billion or equivalent to about 21 per cent of Malaysia’s GDP.

“The illicit cigarette trade costs the government approximately RM5 billion annually. If we are able to reduce it by half, we are looking at RM2.5 billion in revenue on excise duty alone.

“As such, the government should consider lowering excise duty on cigarettes and similar contraband items, to help narrow the price gap between licit and illicit ones. 

“However, there are limitations as it is hard for licit manufacturers to match the price of illicit products. Operational cost of smuggled items are very much lower,” he said.

Abdul Aziz said lowering the tax on cigarettes must be paired with enhanced surveillance and tightened enforcement to stop smuggled goods from entering the country.

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