GST can comeback only when economy doing well, says tax expert

by HABHAJAN SINGH

THE Goods and Services Tax (GST) should only make a comeback when the nation’s economy is chugging along fine and well, says a tax expert.

“When should a GST be introduced? We should only introduce a GST when the economy is doing well. Certainly introducing it now, when we are still recovering from the Covid years, is not advisable. Introducing it when inflation is a concern is also not advisable,” Dr Veerinderjeet Singh says in an article prepared for The Malaysian Reserve.

“As the Government had made its decision in 2018 to abolish GST and re-introduce Sales and Service Tax (SST), I think the suggestion to bring back GST is unlikely to gain any immediate traction,” he said.

On Sept 7, Bank Negara Malaysia’s (BNM) had maintained the overnight policy rate (OPR) at 3.0% for the second straight meeting of the Monetary Policy Committee (MPC) meeting as economic growth and inflation continued to ease, with economy growth in the second quarter of the year affected by slower external demand and a decline in commodity production.

Veerinderjeet (middle, in photo above) comments were prompted by speculation that the consumption tax, abolished by the Pakatan Harapan (PH) government when it won the 14th general election (GE14), may find its way back under the current unity government helmed by Prime Minister Datuk Seri Anwar Ibrahim which preparing the next budget for the federal government.

Among those who have called for the GST reintroduction is MCA president Datuk Seri Dr Wee Ka Siong (right, in photo above).

“I have spoken many times about GST. Every time when the Budget comes, we cannot just talk about expenditures without talking about sources of income. Reintroduce GST,” he said in a video posted on his Facebook page on Sept 1.

Speaking to the media after the 12MP Mid-term Review (12MP MTR) presentation session in Parliament yesterday (Sept 11), Economy Minister Rafizi Ramli did make a reference to the GST, but in no definite way.

Commenting on the national income, Bernama reported that Rafizi said the government was focusing on the development and launch of the capital gains tax (CGT) in 2024.

“Of course, the government will (keep) to that strategy (CGT) (but we will) be open to whatever ways to achieve fiscal sustainability through a wider revenue base, whether it’s going to be CGT, goods and services tax (GST), or any form of direct or indirect taxes. I prefer to keep that strategy open and we will decide on a case-to-case and year-to-year basis,” he said, according to the news agency.

Veerinderjeet, the non-executive chairman at Tricor Malaysia and vice chair at the Paris-based Global Tax Commission of the ICC, also cautioned on the risks of price increases and profiteering, both nagging issues in the recent past.

“The reality is if we bring back the GST like what it was, we will again see price increases and profiteering. The relevant agencies have shown the lack of ability to enforce the law time and time again. So, that is another area that needs to be fixed.

“One weakness in the way GST was implemented was that the communication strategy was weak and that led to misconceptions about GST. The other weakness was that our relevant ministries appeared quite powerless to prevent indiscriminate price increases.

“Yet another perception that the Government needs to address is that tax revenue collected is not spent well – something that the current Government is aware of but has yet to put into effect a clear communication narrative on how tax revenue is being utilized which is the role of all ministries. There is a trust deficit between the people and the Government” he argued.