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Friday, February 21, 2014

Minister: GST lowest in the world, not a burden

The public does not need to worry about being burdened by the impending Goods and Services Tax (GST) because at 6 percent, it is among the lowest rates in the world, said second finance minister.

Giving the example of a consumer who earns RM2,000, Ahmad Husni Mohamad Hanadzlah said government estimates that this consumer would incur only an additional tax of RM15.06 or 2.6 percent of his expenditure.

Government studies further claimed that the GST will only raise prices, as measured by the Consumer Price Index, by a "relatively low" 1.8 percent.

"Our rate of 6 percent GST is low. In fact, it is one of the lowest there is internationally.

"Of more than 160 countries that has GST or its equivalent, only five have a rate of less than six percent," Ahmad Husni (right) said in Kuala Lumpur, during his keynote address at a forum on GST organised by Malaysian Institute of Management.

He added that countries poorer than Malaysia - Burundi, Mali and Bangladesh with GDP per capita of US$250, US$610 and US$680 respectively - had imposed GST rates higher than 10 percent. 

Later, speaking to reporters, Ahmad Husni also said there were also no plans to raise it immediately after it takes effect on April 2015.

The same rate would likely stay for at least two years, he said, even though it would no longer need parliamentary approval but become an administrative decision once the GST law was passed.

'Not regressive'

Rebutting critics of the GST, Ahmad Husni said the tax was not a regressive tax, which means it did not blindly tax both the rich and lower-income groups.

This was because a wide-range of goods and services which are essential to those in the lower income group will be "zero-rated" or exempted from GST.

"If we are to take that into account, the GST is, in fact, progressive," he said.

Ahmad Husni reiterated that the government has a slate of measures to mitigate the impact of the GST, including lowering income tax rates and a one-off cash assistance of RM300 to BR1M recipients.

Businesses will also enjoy training grants and a one percent cut in corporate tax rate, he said.

Mooted for nearly a decade, the GST was tabled and approved by government in its 2014 Budget and will kick-off from April 1, 2015.

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