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Friday, November 1, 2013

GST expected to stay at 6% for next 5 years

| November 1, 2013

The government is expected to maintain the Goods and Services Tax (GST) rate at 6% for the next five years upon its implementation onApril 1, 2015.

KPMG head of tax Khoo Chin Guan said this is because the GST mechanism is new to Malaysians and they need ample time to familiarise themselves with the system.

“GST is new to Malaysian context. All of us need to get used to it,” he told the media in conjunction with KPMG Malaysian Tax Summit 2013 in Petaling Jaya yesterday.

Khoo said the government should invest more in creating awareness about GST among Malaysians for the people to adopt the tax faster and in a more systematic manner.

“With a definitive implementation date of April 1, 2015, the government will need to intensify its efforts over the next 17 months to educate the public on implications arising from the GST and to promote acceptance,” said Khoo.

This, he added, will probably clear all the allegations and misconceptions that the people have of the GST.

However, Khoo did not rule out the possibilities of the GST rate moving up after five years. This would be in line with trends we have seen in other countries but hopefully we will not see the 20%+ rate of some European countries.

“Of course increasing GST cash collection is not solely dependent on the necessary rate.

“Instead there will be penalty provisions and in my view, businesses should make early plans to put in place the infrastructure and suitable safeguards to reduce the risk of penalties,” he said.

The controversial but long awaited GST implementation was announced during the tabling of Budget 2014 by Prime Minister Najib Tun Razak on Oct 25.

After the GST is implemented, personal income tax will be reduced by between 1% and 3%, while corporate tax will be reduced between 1% and 2%.

Currently, individuals pay up to 26%, while corporates pay up to 25% in taxes.

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