SHAH ALAM - With reports buzzing around about reintroducing the Goods and Services Tax (GST), experts have call for the government to get the implementation right to ensure it is not burdening the people and businesses, use the right mechanism as well as consider the suitable tax rate.
TraTax co-founder and tax consultant Thenesh Kannaa said that should the tax be reintroduced, it was vital to implement GST at the right time to avoid consequences to the economy and the people.
"Although GST is a more transparent and efficient tax regime than SST, it is vital to get the implementation timing right to avoid unintended consequences to the economy and people.
"It is also vital to allow sufficient preparation time for businesses and adequate offsetting mechanisms for lower-income groups,” he told Sinar Daily.
Thenesh, who was also the author of ‘Master GST Guide’, said the reintroduction of GST would improve the competitiveness of export-oriented manufacturers and investors in Malaysia.
"This is because the present sales tax exemptions for manufacturers are based on a conventional system, which involves a lot of clerical processes and carries a lot of inherent risk for businesses,” he said.
When asked about the suitable rate for GST should it be reintroduced, Thenesh said tax rate should be considered along with the extent of exemption
"For example, a low tax rate without any exemption could be damaging to low-income groups compared to having a higher rate with carefully decided exemptions.
"It would be misleading to consider tax rate in isolation without regard to exemptions and other targeted initiatives to offset the impact of GST,” he said.
Meanwhile, economist Professor Dr Yeah Kim Leng of Sunway University said there should be an exception to the tax on basic necessities like food and education for lower-income groups.
"The government can either zero rate the tax or provide cash hand-out to offset the tax burden.
"This will enable them (lower income group) to cope with the price of living due to GST,” he told Sinar Daily when contacted.
Discussing on the suitable rate for GST now, Dr Yeah suggested that four to five per cent tax would be reasonable to gain wider acceptance and reduce the impact on inflation.
"We have to educate the public (that there are) other countries (that) have more than 10 per cent of GST.
"The shared tax burden in Malaysia is low, and it’s one of the reasons why we need GST because it is wider. Basically, it is a broad tax that taxes consumption rather than income, so you don’t discourage effort (income is an effort).
"In this case, consumption-based tax is seen to be equitable in the sense of ‘the more you consume, the more you pay the tax’,” he said.
Dr Yeah also urged the government to educate and convince the public about GST before implementing it.
The government should come together and explain to the public that the increase in revenue collected is actually a tax burden and would be used prudently for the country’s development purposes.
"Only then there will be a wider acceptance of GST by the public,” he said.
Dr Yeah added when GST was first introduced, one of the criticism received was the refund process was not properly implemented and there were allegedly a lot of leakages.
He said that it was essential to ensure the tax collected were not diverted hence the government need to ensure that the whole economic or diversion of revenue does not become a political issue.
"Importantly, we can keep it at a manageable level and some of the additional revenue collected by the government will help to provide subsidies for low-income groups.
"Most important, the government have to increase/show the increased revenue is well-stand, where there is no misuse, no leakages and this time around we have to get the implementation right because the last time we had problems likes slow refund which forced businesses to fork out their own money,” he said.
This came after a special interview with Nikkei Asia in Tokyo recently, where Prime Minister Datuk Seri Ismail Sabri said GST was seen as capable of widening the country’s revenue base, and the government was not ruling out the possibility of reinstating it as an effective way to increase national income and help combat inflation and the rising cost of living.
GST was first introduced in 2015 under former Prime Minister Datuk Seri Najib Abdul Razak, which imposed a six per cent tax. It was later abolished after the fall of Barisan Nasional in 2018.
It was reported that Pakatan Harapan (PH) was against the proposal to reintroduce GST, with the presidential council saying that such a move would be harmful to the public given the current situation of high inflation and rising cost of living, as well as the effects of the Covid-19 pandemic on household income.
Former director-general of the Royal Malaysian Customs Department Datuk Seri Subromaniam Tholasy had said that GST reintroduction to replace the current sales and services tax (SST) should be implemented in a targeted manner so it would not burden the lower-income group.
On the other hand, the Federation of Malaysian Consumers Association welcomed the reintroduction of GST, as the move would contribute to increasing the national income.
Prominent banker Tan Sri Nazir Razak was also reported as saying that he supported GST reintroduction if it was done the right way as it was necessary for the long-term to bring Malaysia forward.
He had also suggested for the government to introduce a windfall tax to the higher income groups.
It was said that the reintroduction of GST would result in a sharp rise in the prices of goods.