A goods and services tax (GST) of between 6% and 7% would address the nation’s fiscal deficit and provide for the transformation of a fundamental and equitable tax system in the country, a tax consultant said.
PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) senior ED Wan Heng Choon said implementation of the GST should be in tandem with the progressive lowering of taxes on corporate and individual income to ensure a fair tax system.
“The GST will be able to address the inherent weaknesses of the existing sales and services tax (SST),” he told newsmen at a media workshop in Kuala Lumpur yesterday.
Among the rationale for GST is that the high petroleum revenue that the government is currently dependent on cannot be sustained over a long period aside from declining import duties due to trade liberalisation policy. In addition, Wan said the GST will also be a more stable source of revenue compared to income tax as it is less susceptible to economic downturn due to the consumption nature of the tax.
On its implementation, Wan said it requires political will and a time frame of 18 months from the date of the announcement by the government.
“There are numerous benefits in the implementation of the GST as over 140 countries in the world have already implemented the GST. Only three countries in the Asean region have yet to implement them — Brunei, Myanmar and Malaysia,” he said.
He added there are some myths in the implementation of the GST that need to be debunked, notably that it affects the lower income group and that there will be a general increase in all prices.
Wan refuted those points, adding that there are large number of goods and services such as essential foodstuff, water and electricity, government services and public transport, health, education, highway toll, financial and residential property that would be exempt from the GST.
In addition, Wan said existing legislation such as the Anti- Profiteering Act is in place to deter retailers from charging excessively on goods.
PwC ED RS Raja Kumaran said the International Monetary Fund (IMF) officials while on a site visit to Malaysia in the early part of the introduction of the GST concept in Malaysia had advised against the granting of zero-rated items (exempt from GST).
“They (the IMF) said that zero rated items would not be equitable to the tax system as they would benefit the rich as much to the poor,” he said.
However, RS Raja disagreed with the recommendation, maintaining that basic foodstuff items needed to be zero-rated so as not to burden those with limited disposable income.