Momentum builds for GST as Putrajaya seeks to trim deficit

August 29, 2013UPDATED: August 29, 2013 02:37 pm

Ringgit notes are seen among other currency notes in this file photo illustration.
Malaysians will have to pay more for goods and services when GST is introduced. — Reuters pic

KUALA LUMPUR, Aug 29 — The government gave its clearest signal yet today that it will introduce the controversial goods and services tax (GST) soon with global economic headwinds bearing down on the country.

Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah said today that GST is a must, and not an option.

“GST is a must, it’s not an option already.

“We are trying our very best to include it in this year’s budget, maybe if everybody agrees,” he said during a question-and-answer session here at the Economic Transformation Programme (ETP) mid-year briefing.

He also confirmed reports that GST could be included in the Budget 2014 proposals that would be tabled in Parliament on October 25, and indicated that Malaysians can expect to see the tax being imposed possibly by 2015.

“If the government announces, it will take about 14 months to implement,” he said.

“If they announce this year, then it would come on line in 2015,” he added.

Mohd Irwan also indicated that the government would take a holistic approach in tackling tax reforms, saying: “We will also look at corporate tax, we will also look at personal tax, it will be a total package, nobody will be left out.”

Irwan also moved to fend off attacks on the proposed GST, saying: “The ultimate aim of the GST is to take care of the country and people so anything we introduce, we won’t burden the people.”

He said there would be tax rebates for small and medium enterprises, pointing out that the government has identified a list of basic necessities such as rice which will be exempted from GST.

Putrajaya had previously deferred introducing GST as Barisan Nasional (BN) leaders were not willing to add to the opposition’s arsenal in the keenly contested general election in May.

But with elections over and the country’s fiscal deficit becoming a major economic issue, Putrajaya is now accelerating moves to introduce the broad-based tax.

Malaysia’s fiscal deficit has already widened to RM14.9 billion.

The implementation of GST could help the country broaden its tax base and reduce the government’s reliance on dividends from state oil company Petronas.

Malaysia runs a relatively high government debt of 53 per cent of gross domestic product and has one of Asia’s highest household debt levels.

Ratings agency Fitch cut its outlook on Malaysia’s A-minus sovereign debt to negative from stable in July, citing a lack of reform to tackle rising debt.

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