ON Jan 2, the Finance Minister wrote an op-ed in the StarBizWeek, which amongst other things, talked about the government “executing its Medium-Term Revenue Strategy... to meet medium-term revenue goals.”
He reached out to civil society to contribute viewpoints on the country’s finances.In recent days and weeks, tax consultants, union leaders and politicians have been speculating on this very issue.
One wrote that the previous value-added goods and services tax (GST) will make a return simply because the government needs more taxes, implying that it will raise more revenue than the current sales and service tax (SST 2.0).
A report in Focus Malaysia that appeared on the same day as Tengku Datuk Seri Zafrul Aziz’s article, warned that the GST should not be reintroduced until a “living wage” was first introduced to increase the people’s income, especially of the lower income groups, so that they can meet the higher living costs under the GST.
So, it is perhaps time to once again consider the merits of GST versus SST 2.0. We have had experience with both systems in a matter of three short years.
The experience gained by the government, the private sector and the consuming public should inform our choice. If ever the government wants a return to the GST, it is probably because it is attracted by the RM44bil raised in 2017 (last full year of GST).
In 2015, SST raised RM18bil, and under SST2.0, revenue rose to RM28bil in 2019. The GST also has the advantage of avoiding the problem of cascading effect of tax, a tax on tax, and is transparent, which the consumer can see on the shopping bill.
The GST was an election issue in 14th general election, and it was not popular because most people felt it had caused prices to go up across the board, despite generous exemptions and zero-rating. It was promptly repealed in 2018.
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