Malaysia should not delay the implementation of GST

May 29, 2013

KUALA LUMPUR:  Falling revenues from the national oil reserves makes the implementation of the much debated goods and services tax (GST) a necessity.

GST has been proven to be a better tax system as it is more effective, efficient, transparent and business friendly compared to the current taxation system. It could also spur economic growth and enhance the country’s competitiveness.

However, one of the prime reasons for its implementation is that it is capable of generating a more stable source of revenue for the nation because its less susceptible to economic fluctuations.

GST is a consumption tax, and with the Malaysia’s economy being increasingly dependent on domestic consumption, it is expected to bring more revenue for the government.

“The argument for the implementation of GST becomes more compelling with the imminent formation of the Asean Economic Community (AEC) in 2015 which will see tariffs and excise duties being slashed across the board,” said Taxand Malaysia Sdn Bhd chairman Dr Veerinderjeet Singh.

The government has taken the initiative to introduce a GST bill in 2009 but it was withdrawn after there were calls made by certain quarters to improvise the bill.

“The government has consulted the business sector, the accounting and tax fraternity on GST implementation but the engagement with the rakyat was still lacking,” said Dr Veerinderjeet. The Royal Customs Department, which will be responsible for the collection of GST has even incorporated a portal on GST on its website.

It seems that all the systems are “go” for the implementation of GST at 4% but what is holding the government back? The lack of engagement with the rakyat may obscure the benefits of GST and this could be manipulated by certain quarters by telling them that GST would burden them.

The government has just been given a fresh mandate by the rakyat from the recently concluded 13th General Election and it may not want to be perceived as burdening the rakyat.

The question that arises is can it afford not to implement GST in the light of falling revenue and pressure to undertake subsidy rationalisation to narrow the government’s budget deficit. GST if implemented would see corporate and personal tax rates coming down and this would benefit the rakyat in the long run. The trade off is here is the government ready to make an unpopular decision in order to achieve greater benefit for the country in the long-term?