Tax Burden Will Be Evenly Spread With GST, Says Economist

KUALA LUMPUR, Oct 23 (Bernama) -- An Alliance Bank Malaysia economist says that the tax burden will be more evenly spread with the likely introduction of a broad-based tax regime such as the Goods and Services Tax (GST) in the 2014 Budget announcement.

Chief Economist, Manokaran Mottain said there is a major need for Malaysia to broaden its tax base, as only an estimated 10 per cent of the working population pay tax at present.

"Going by recent developments, we expect the government to announce a timeline for the implementation of the GST in 2015.

"The government may need a period of between 12-18 months for the parliamentary process for it to be legislated," he told Bernama.

The ideal GST rate for a start could be between four per cent and five per cent, Manokaran said.

The introduction of the GST will be a replacement of the existing sales and services tax.

The sales tax rate stands at six per cent, while the service tax ranges between five and 10 per cent.

The GST was first mooted in 2007, but its implementation was delayed due to the global financial crisis.

The Budget 2014 would be the penultimate budget under the 10th Malaysia Plan and also inches closer to the midway point through the decade in approaching the much anticipated Vision 2020.

Despite expectations of certain populist policies, this year's budget is significant, as the government juggles between pro-active growth and the reining in of expenditure, said Manokaran.

Meanwhile, RAM Ratings Chief Economist Dr Yeah Kim Leng said the implementation of the GST is expected to take place by mid-2015.

"It is quite critical to implement the GST. It will help reduce dependency on direct income tax which constitutes 27 per cent of tax revenue," he told Bernama.

Apart from implementing the GST, Yeah said privatisation of the government's non-core assets could also be an avenue to widen its coffers.

-- BERNAMA