GST reintroduction rational amid crisis, say economists


MALAYSIANS are of mixed views regarding the possibility of a GST comeback and Prime Minister Datuk Seri Ismail Sabri Yaakob is aware of it.

In his recent interview with Japan’s Nikkei Asia, Ismail Sabri acknowledged the GST’s unpopularity but said the government had limited options.

Siding with the GST was PwC Malaysia’s head of indirect tax Raja Kumaran who opined that reintroducing the tax during this time is acceptable.

“Do understand that a new tax system is usually introduced when the economy is doing well. However, GST as a better taxation system has been used in more than 160 countries.

“It is still a good time to introduce it, as the current Sales and Services Tax system has cascading issues which will contribute more to inflation that could lead to distortion in the taxation system,” Raja told The Malaysian Reserve (TMR) recently.

He said Malaysia could expect the GST “anytime soon”, especially with the Finance Ministry and the Royal Malaysian Customs Department (RMC) being dedicated to working on the proposal.

“Since we have implemented it before, it should not be difficult to do again. We need more hand-holding and roadshows to create awareness,” he said.

However, he said that RMC as well as the Domestic Trade and Consumer Affairs Ministry need a robust price monitoring programme once the reintroduction of GST is implemented.

Meanwhile, Malaysian Rating Corp Bhd chief economist Firdaos Rosli saw GST is a political problem for now rather than about stabilising the country’s economic or financial states.

“In the past, we introduced it because of the economic efficiency, but it was repealed due to the political feasibility or the lack thereof. So, it is now a political issue,” Firdaos told TMR.

Although he viewed GST as “not a nice-to-have” kind of tax system, he said it must be reintroduced, adapted and refined, which needs a political will to implement.

“If not the GST, we will be introducing a lot of peripheral taxes like Cukai Makmur, sugar tax and all of these nonsensical taxes to supplement a growing economy,” he said.

He stressed that there is no right or wrong time as Malaysia needs a sustainable form of revenue generation and more expenditure while the country’s economy grows.

“Tax reform is a very strange thing. The longer you delay, the more expensive it gets over time.

“It is never about the timing but about why you want to introduce it in the first place,” he added.

He opined that GST could cushion Malaysia from the impact during a crisis as it would not be seeing a revenue cliff when direct taxes take a beating.