GST not regressive, says customs director

Published: Wednesday November 13, 2013 MYT 12:00:00 AM 

Updated: Wednesday November 13, 2013 MYT 8:41:05 AM

KUALA LUMPUR: The goods and services tax (GST) is not regressive as reported by some social media and newspapers, but is progressive, taking into account the numerous products and services which will not be taxed.

Royal Malaysian Customs Department director of internal tax division, Subromaniam Tholasy, said the GST has considered the expenditure of the low-income groups and excluded basic necessities.

“If we tax everything, it would be regressive, but in Malaysia, we are excluding the GST from being implemented on necessity products as well as other services such as healthcare and Government services. So, there is no reason to say that it burdens the lower-income group,” he said at the Malaysian Association of Tax Accountants 2014 Budget Seminar here yesterday. — Bernama

Subromaniam, one of the panellists at the seminar, spoke on the impact of the GST on the rakyat and businesses.

He said the GST would have a minimal impact on the lower-income group, as a study by the organisation showed that 40% of this group’s expenditure was spent on necessity products which would be zero-rated.

Furthermore, he said the tax structure was transparent and allowed the Government to detect any profiteering, and that action would be taken under the Price Control and Anti-Profiteering Act.

On the GST’s impact on the housing sector, he said that although the raw materials would be taxed, the overall industry was not expected to be substantially affected because most of the materials were already being taxed under the current tax system. “Most of the materials are being imposed with a 10% sales tax. Under the GST, these materials would only be imposed with a 6% tax and the lower rate would compensate for the GST’s implementation on materials which were not taxed before,” he said.

On the effects of the GST in the event Malaysia faced an economic crisis, he said the new tax would stabilise the nation’s revenue, and this was all the more reason for its implementation.

The GST, announced by Finance Minister Datuk Seri Najib Tun Razak in Budget 2014 last month, will be implemented from April 1, 2015, to replace the sales and services tax.

The new tax system will carry a 6% tax rate as compared to the current tax structure which imposes up to a 16% rate. - BERNAMA