| October 28, 2013
Aside from broadening the earnings base for the economy, the accompanying reduction in corporate tax and income tax would also make Malaysia more competitive.
PETALING JAYA: The Goods and Services (GST) that was announced by Prime Minister Najib Tun Razak last Friday is expected to be boost the economy as it would now allow the government to have a predictable source of revenue, economists contacted by The Malaysian Reserve said.
They added that aside from broadening the earnings base for the economy, the accompanying reduction in corporate tax and income tax would also make Malaysia more competitive.
CIMB Investment Bank Bhd chief economist Lee Heng Guie said that the implementation of the GST has been long delayed and would provide an important source of income that would help reduce Malaysia’s deficit.
He said the GST will replace the Sales and Service Tax (SST) which currently is at 10% and 6% respectively. “Currently SST rakes into the government coffers approximately RM16.4 billion”, he said.
An economist who chose to remain anonymous said that the GST would rake in at least RM10 billion more than the SST bringing in about RM26.4 billion for the government coffers. Lee said that the GST will reduce Malaysia’s dependence on petroleum revenues that rake in about 40% of the government revenues.
The prime minister said while unveiling Budget 2014 that the SST will be abolished to be replaced by a single tax known as the GST which will be enforced on April 1, 2015, at a rate of 6%.
He also announced that the government will provide a one-off payment of RM300 to BR1M (1Malaysia People’s Aid) household when the GST is implemented.
The government will also reduce personal income tax by one to three percentage points and individual income tax structure will also be reviewed.
There will be no GST levied on essential food items, transport services, including toll payments, purchases and rental of residential properties and selected financial services.
GST will not be imposed on basic food items, piped water supply, the first 200 units of electricity per month for domestic consumers, services provided by the government such as issuance of passports and licences, health services, school education.
RAM Holdings Bhd chief economist Yeah Kim Leng said the GST was long overdue and that the implementation will provide a stable source of revenue that would be susceptible to downturns due to the consumption nature of the tax.
In addition, Yeah said that it will help in the administration of tax in the country, giving the government flexibility in tax management and the accompanying reduction in corporate and income tax making Malaysia more competitive.
Overseas-Chinese Banking Corp Ltd head of treasury research and strategy, Selena Ling, said 6% GST in 2015 bodes well, signalling the government’s serious intent to improve its fiscal housekeeping.
She said the various exemptions for food, piped water supply and transportation and the accompanying reduction in corporate and income tax will sooth the GST transition pains.
This content is provided by FMT content provider The Malaysian Reserve