pic by BERNAMA
THE government has no intention to reinstate the unpopular Goods and Services Tax (GST) after scrapping the consumption levy in June last year on a public uproar over rising cost of living.
Prime Minister (PM) Tun Dr Mahathir Mohamad said the wide-ranging consumption tax increased prices of goods and made reimbursements difficult for businesses, drawing criticism from the public.
Dr Mahathir added that the Sales and Service Tax (SST), which was introduced to replace the consumption levy, has worked well despite its revenue falling short of the GST.
“Although the collection of the SST is lower at the moment, it is a fixed amount which does not require any adjustments by government officers and those who pay the SST.
“I am confident that in the years to come, revenue from the SST will be higher than the GST,” he told the Dewan Rakyat yesterday.
He was responding to Datuk Seri Ismail Mohamed Said (Barisan Nasional-Kuala Krau), who enquired during minister’s question time about how the government will address the GST shortfall.
In recent weeks, there were calls from some sections of the public for the government to reintroduce the GST to boost the administration income. The government is struggling with spending for growth and having the income to drive economic activities.
Putrajaya is also struggling to ensure its fiscal deficit will meet the target as a widening deficit could impact the country’s sovereign ratings, make borrowing more expensive and add pressure to the already thin finances.
Dr Mahathir also reiterated that the country’s tax system should not be changed too often as it would dent investors’ confidence.
He said this in response to MP Ma’mun Sulaiman (Pakatan Harapan-Kalabakan), who asked about the government’s position on reimplementing the GST.
The PM recently expressed the government’s willingness to consider bringing back the consumption tax — “if the people believe GST is better,” he said last week as quoted by Bernama.
“We will study whether it (GST) is better than SST,” he added.
The Malaysian Institute of Economic Research (MIER) had urged the government to reintroduce the GST in Budget 2020, but proposed a lower rate of 3%. Several economists have also backed the suggestion.
MIER chairman Tan Sri Kamal Mat Salih said the reintroduction of GST could help the government address revenue gaps in other domestic industries.
“GST could be introduced at a lower rate and complemented with subsidies at the other end to support the businesses. When oil prices plunged deeply, the GST kept the government afloat,” he said.
The GST came into effect on April 1, 2015, at a rate of 6%, but was subsequently replaced with the SST starting Sept 1, 2018. Under the SST, sales of goods are taxed at 10%, while the provision of services is taxed at 6%.
The absence of the GST, despite being replaced by the SST, has resulted in a turnover deficit of over RM20 billion for the federal administration — pushing it to rely more on oil dividends.
Petroliam Nasional Bhd agreed to pay an additional dividend of RM30 billion to Putrajaya this year to help plug the RM37 billion outstanding GST and income tax claims hole.
The dividend is on top of the RM20.08 billion in petroleum tax and RM70.03 billion in corporate tax collected by the government last year.
The previous administration planned to collect RM43.8 billion, or about 18% of total revenue in 2018 from the GST.
Collection from the SST in 2019 is estimated at RM22 billion, only half of the GST collection.