Tengku Zafrul: SST exemption extension costs govt RM4.8b loss

by S BIRRUNTHA / pic by TMR FILE

THE government has lost RM4.8 billion worth of tax collection to date from the extension of Sales and Service Tax (SST) exemption, according to Finance Minister Datuk Seri Tengku Zafrul Tengku Abdul Aziz (picture).

The minister said the government is still studying whether to extend the SST exemption for vehicles which is ending on June 30 this year.

He added that the tax loss is considered sizable and the money could have been used to help the people amid the current challenging economic situation.

“During the Movement Control Order period until now, we have extended it several times but the loss of revenue is RM4.8 billion. That is a large amount that we can use to help the people.

“So, we have to study this matter carefully. Let’s say, we decide to extend it for another three months, the cost of that will be about RM1.2 billion, at least. If it’s another six months, it would be RM2.5 billion. The more cars being sold, the more revenue we lose.

“Where are we going to get the (money) in terms of revenue, especially when subsidies are already high in order to help or control the inflation situation,” he told the reporters after launching the Labuan International Business and Financial Centre (Labuan IBFC) Strategic Roadmap 2022-2026 in Putrajaya on Thursday.

Nevertheless, the minister noted that the government will make a decision on the matter by the end of this month.

Commenting on the US Federal Reserve’s (Fed) interest rate hike of 0.75 percentage point (ppt), Tengku Zafrul said the decision does not affect Malaysia for now.

He added that in fact, the increase had been expected since last week.

“As we know, the market is also affected and this is because of the high inflation rate in the US which has caused their central banks to raise interest rates,” he noted.

On Wednesday, the Fed announced the most aggressive interest rate increase in nearly 30 years, and said it is prepared to do so again next month in an all-out battle to drive down surging inflation.

The massive 0.75 ppt hike came with the Fed under intense pressure to curb soaring gas and food prices that have left millions of Americans struggling to make ends meet and sent President Joe Biden’s approval ratings plunging.

Commenting further, Tengku Zafrul said Malaysia is currently monitoring the further development of the matter and its impact at the global level.

“Malaysia as a small but open country, depends on the growth of the world economy and the expectation is that with this interest rate hike, the US economy will still expand but at a slower pace.

“What we’ve done so far, our interest rates are still low but it depends on the global level,” he added.

As such, the minister said Malaysia needs to have an intervention in terms of monetary and fiscal policies that are reasonable in order to protect the people from the effects of high inflation.

Separately, the Labuan IBFC Strategic Roadmap 2022-2026 was officially launched by the minister, charting a way forward for the development and progress of the international business and financial centre over the next five years.

The main aspiration under the five-year strategic roadmap is to transform the Labuan IBFC into a dynamic and sustainable international centre that links and supports the economic growth of Asia’s markets and contributes to the national economy.

The development of the strategic roadmap is anchored on the existing strengths and emerging niches of the Labuan IBFC.

It sets out the priorities to foster market sustainability and dynamism by embracing digital innovation and revitalising key business sectors and niches to intensify market growth.

The strategic roadmap will also place particular focus on the enhancement and upscaling of Labuan Financial Services Authority’s regulatory and supervisory functions in order to ensure orderly business growth and market stability in the centre.