OECD suggests GST reintroduction

THE government should consider to reintroduce the Goods and Services tax (GST) in the medium term considering the efficiency of tax collection and the need to raise revenue.

The Organisation for Economic Co-operation and Development (OECD) secretary-general Mathias Cormann said the government first needs to strengthen tax compliance and efficiency of tax collection, while securing the transparency of its enforcement.

He said the government has made considerable efforts to expand its tax base by introducing new taxes, but overall tax base could also be broadened through reviewing tax relief and exemptions.

“The overall design of the personal income tax could also be strengthened through reviewing its tax base, which has been narrowed by various tax relief and exemptions.

“Some of these tax relief and exemptions would be less targeted and regressive, adding administrative costs,” he said while presenting the OECD Economic Survey of Malaysia 2021 virtually today.

The introduction of the GST of 6% in 2015 helped shore up the federal government revenue considerably.

Nevertheless, the GST was repealed in 2018 amid the concern about its regressivity affecting the purchasing power of low-income households, and the former Sales tax and Service tax were reintroduced (also 6% for the Service tax but on a narrow list of products).

OECD also suggests the government to enhance overall social protection, including through social transfers targeted at low-income and vulnerable households. –by NUR HANANI AZMAN