GST set to plug tax loopholes

Publication: NST

Date of publication: Mar 20, 2013

Section heading: Business Times

Page number: 005

Byline / Author: By Rupa Damodaran; Kamarul Yunus; Zaidi Isham Ismail; Ooi Tee Ching; Rupinder Singh; Roziana Hamsawi; Cheryl Yvonne Achu

THE broad-based Goods and Services Tax (GST) consumption tax will enable the government to plug loopholes in the current taxation system, especially on leakages through tax evasion.

The estimated additional revenue from the GST implementation in its first two years is between zero and RM8 billion, depending on the proposed implementation rate of four to five per cent.

If the GST is set at four per cent, the revenue is expected to remain neutral.

Expected to replace the current sales tax and service tax, which are set at 10 per cent and six per cent, respectively, the tax will be levied on "value-added activities" along the delivery chain.

However, most basic products and services such as rice, raw meat, fresh fish, vegetables, domestic public transportation and healthcare services will be tax-exempt or zero-rated.

The GST forms part of the initiatives by the Public Finance Reform SRI, which targets the federal government budget deficit to shrink to three per cent in 2015 and near budget neutral by 2020.

The initiatives include an improvement in tax compliance and administration, rationalisation of corporate tax incentives, expenditure control, transparent procurement and other initiatives such as broad-based tax like the GST.