by Ronnie Teo email@example.com.
Posted on December 9, 2013, Monday
KUCHING: As a global benchmark sales tax, the Goods and Services Tax (GST) will help Malaysia to remain competitive in the eyes of the world so long as the government takes an effective stance while transitioning towards this new system.
Association of Chartered Certified Accountants (ACCA) global head of taxation, Chas Roy-Chowdhury, affirmed the need to make sure there is a counterbalance against the price increases of the goods to compensate with the people and taxpayers.
“In broad terms, I think we need to realise that GST is a broad based tax whereby eventually, Malaysia will need to have a tax where your aren’t relying purely on the working population which is the case in Hong Kong and they were looking at this a few years ago and decided not to go ahead,” he outlined in a phone interview with The Borneo Post.
“And so I think it is something where we need to see how the tax is being planned but generally speaking, it’s probably a positive move which needs to happen which will bring Malaysia to line with many other jurisductions.”
The critical thing about GST, he said, was that its fully recoverable and that you have no GST applied on exports.
“So, as long as those two things happen – so you have the GST where businesses are able to recover their input tax from the end users who pay the GST – that would be fine, that’s where you expect it to work.
“However, it doesn’t always work in many cases such as in some European countries, so that is a problem with GST if it is implemented where the government aims to optimise revenue rather than looking to implementing it effectively.”
In terms of international competitiveness, Chaz believed Malaysia would receive support as long as there is no residual in GST attached to goods exported so there would be no recovery of GST in the supply chain as well as the time when the exports happen.
“I think those two things are quite critical to Malaysia staying competitive, but I think in many ways, compared with sales tax, I think GST will be more transparent when it comes to exports,” he said.
“You will be able to recover much more of the GST along the way in the supply chain which you can’t do for most sales tax.”
ACCA’s Global Economic Conditions Survey (GECS) for the third quarter of 2013 showed that finance professionals working in Malaysia’s businesses reported a drop in confidence, while approval for the government’s economic policies were at its lowest for quite some time, with 63 per cent disapprovals.
When asked if this would boost the confidence of doing business within the country, Chaz said as long the GST was implemented in a way that was fair and allows full recovery, the GST would help businesses pin more investments in Malaysia.
“This is similar to the many models around the world. They encounter GST everywhere else when they do business. Malaysia will really be falling into line with those jurisdictions. So, this will really help create a benchmark for taxes.”
The real counter-productivity from all these, he added, was the individual perceptions in terms of media departing information to individual businesses on how to go about GST and how it works. He also advocated politicians to properly compensate individuals and businesses for each stage the increase in prices.