A solution should be found for the cascading effect of the Goods and Services Tax (GST) before the government considers reimposing the taxation system, say experts.
Socio-Economic Research Centre (SERC) executive director Lee Heng Guie said previous issues such as delayed refund payments which had impacted businesses’ cash flow, besides the cascading effect towards the cost of living, should also be addressed.
“If ever the government wants to reintroduce GST, they need to further look into this matter.
“Our revenue is constrained partly because oil revenue has dropped and with a narrow tax base of about 11% of tax revenue to GDP ratio, there is a tax gap that the government has to fill in, ” he noted.
Lee urged the government to ensure that the low income group would not be severely impacted by the implementation of GST and that essential items were exempted from the taxation.
“The rate of GST should be set at a mid-range level of 3% to 4%, which can be gradually increased. To ensure that people’s disposable income would not be significantly eroded, the government also needs to impose gradual reduction in income tax, ” he said.
In preparation of the implementation, Lee said the government should give sufficient time of at least a year beforehand to re-educate the people regarding the taxation system.
Lee noted that it was a worldwide trend that countries were reducing direct taxes on people and hiking up indirect taxes such as consumption-based tax like the GST.
Malaysian Youth Council president Jufitri Joha also agreed that GST was a good tax regime as an alternative to SST, as it ensured those who were supposed to pay taxes did so.
Jufitri, however, suggested that the SST should be maintained for now to consider those who had been financially impacted by the Covid-19 pandemic.
“GST is a taxation which is more transparent. The taxation was previously imposed on businesses with annual sales turnover of RM500,000 and above.
“Small businesses would not be impacted by this implementation but I worry that some will take advantage of the situation to increase prices, as it has happened before, ” he said.
Jufitri suggested that in the meantime, the government should continue to study the best way to implement GST to avoid impacting the people’s cost of living.
“The impact towards the people should be minimal but I hope that when the time comes, the government will reintroduce GST in stages, and begin with 3% rather than the 6% implemented previously, ” he said, urging that consultation with the people, NGOs and stakeholders should be done prior to the implementation.
Malaysia Singapore Coffeeshop Proprietors’ General Association president Datuk Ho Su Mong said the government should not impose a 6% rate when reinstating the GST.
“They should start with a lower rate, say 3% and increase by the years. People would feel the pinch when the tax is high and that is why people are against it, ” he said.
Dato Ho said the GST was a good tax collection system for any country as it had been implemented in more than 100 countries.
“This system is fair as it covers most sections of society. Everybody has to contribute a bit for the country’s coffer so that it can be run well and fairly for all.
“The rich will pay more when they buy more, so it is quite fair, ” he said, noting that consumers would not be discouraged to spend if the system was properly practised and implemented.
