THE Federation of Malaysian Manufacturers (FMM) has welcomed Prime Minister Datuk Seri Ismail Sabri Yaakob’s call to introduce the Goods and Services Tax (GST) at a rate that would not burden the people but still help widen its revenue base in order to lower the government debt ratio and accelerate the pace of fiscal consolidation.
The organisation said that the GST is a more transparent and effective tax regime compared to the Sales and Services Tax (SST).
It revealed that based on a survey carried out by FMM on the reintroduction of GST in May 2020, a total of 499 companies that responded to the survey strongly supported for the GST to replace the current SST 2.0.
This is because “GST provides a fairer tax structure and eliminates the cascading and compounding of taxes commonly found in the SST regime”.
“In addition, prices of Malaysian exports will become more competitive on the global state as no GST is imposed on exported goods and services while GST incurred on inputs can be recovered along the supply chain,” FMM president Tan Sri Soh Thian Lai pointed out.
“Moreover, because this broad tax base system would increase indirect taxes, it will give flexibility to the Government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination.”
However, bearing in mind that the Government’s focus is the revival of the economy and that manufacturers will now need to prioritise their effort on rebuilding their businesses, Soh noted that the reintroduction of the GST (or in this case GST 2.0) should not be considered in isolation but as part of the holistic assessment of Malaysia’s tax systems and the country’s fiscal position.
As such, while the introduction of a broad-base consumption tax would strengthen the country’s fiscal position, GST 2.0 must be easy to manage and also not increase the cost of doing business.
“As the change and transition to GST 2.0 can be challenging, FMM calls for the Government to consult all stakeholders for a thorough review process to ensure the success of introducing an effective tax regime,” Soh said in a statement today (June 2).
“While switching back to the previous automated model under the GST Tax Payers Access Point (TAP) system will not be difficult as GST compliance systems are already in place, companies have asked for a 6-month transition period to change from current SST to GST 2.0 based on our May 2020 survey.”
In a recent interview with Nikkei Asia, Ismail Sabri said the Government was keen on reintroducing GST.
He said the government was aware of the GST’s unpopularity but it had limited options, also noting that it had lost RM20 bil in annual revenue after the tax was abolished.
The prime minister said the government would target a GST rate that would not burden the people but is not so low that it “defeats the purpose of expanding tax revenue”.
GST, which was implemented in 2015 under Barisan Nasional, was abolished after Pakatan Harapan won the 2018 general election. – June 2, 2022
