Tengku Zafrul: consumption tax, GST deeply unpopular but necessary

KUALA LUMPUR – Reintroducing the Goods and Services Tax or other consumption-based tax, while highly unpopular, is necessary to increase government revenue that will, in turn, be spent to help the national economy and its people, said Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz.

Tengku Zafrul explain such taxes were among the changes in fiscal policies the government aimed to introduce to broaden its revenue stream.

Similarly, the government is set to introduce ints Medium-Term Revenue Strategy later this year on how it plans to increase revenue collection.

However, introducing new taxes poses complex challenges as timing also plays an important aspect as the national economy is still recovering from the onset of the pandemic coupled with the recent devastating floods, said Tengku Zafrul.

“We need more revenue stream for the development of the country because from this development expenditure there will be positive multiplier effects in terms of job creations and much more.

“So for the long term, we need to look back at GST but the explanation on the matter must be very clear. But the suggestion has yet to be brought to the Cabinet because I think the timing is also important.

“Now with the pandemic and the recent massive floods, timing must be right. When the national economy is back on the right track, it would be easier for us to discuss this.

“If not, people would not accept it,’’ he said in an exclusive interview with Sinar Daily last Friday (Jan 21)

Previously, GST was announced in Parliament in October 2013. It was then implemented on April 1, 2015, under Datuk Seri Najib Razak’s administration.

Following Pakatan Harapan’s historic win in the 2018 general elections, then Finance Minister Lim Guan Eng announced that the government are annulling GST.

However, Lim then had even acknowledged that scrapping GST has left an RM21 billion gap in the government’s revenue for 2018.

The GST was introduced with a six per cent rate at the time.

Speaking to Sinar Daily, Tengku Zafrul said before he plans to discuss the matter of GST with the Cabinet and subsequently tabled it in Parliament, the deliberations now would be the appropriate rate for the tax.

“Before I brought the matter to the Cabinet, we have to agree on what would be the percentage rate. Previously it was six per cent so do we want to reduce it and by how much?

“But if we reduce too low, then it would not be effective as the revenue would be less. What is important is now is the people’s acceptance. If they accept why we need to bring back GST, it would be much easier.

“If not then the process would not proceed well but how we get people to accept it, is by showing them that the money collected from GST will be used to help the people.

“Providing aid to the people and propelling national development is highly dependent on our revenue. So we have to explain where the GST funds are being spent. This is an important long term step for our country,’’ he said, adding it is also crucial if the country wishes to achieve a budget deficit reduction of five to three per cent by 2025.