GST a more ‘equitable’ taxation system, MCA says

OCTOBER 26, 2013

Dr Chua stressed the need to put an end to the gross inflation on the pricing of goods,
as highlighted every year in the Auditor-General's Report. — Picture by Saw Siow Feng

KUALA LUMPUR, Oct 26 — MCA came out today in full support of the Goods and Services Tax (GST) introduced in Budget 2014, agreeing with the view that it was a more equitable taxation system where all Malaysians would share in contributing to the country's tax base.

In a statement here, MCA president Datuk Seri Dr Chua Soi Lek said there was a need to spread out the tax collection net, pointing to how at present, only one million of 28 million Malaysians pay personal income taxes.

"On the implementation of Goods and Services Tax (GST) in 2015, MCA will fully support it," he said.

"It is a consumption tax when you consume more you pay more taxes. Hence it is more equitable."

Dr Chua stressed, however, on the need to put an end to the gross inflation on the pricing of goods, as highlighted every year in the Auditor-General's Report.

He said Putrajaya needed to take stern action against those responsible to send a clear signal on the importance of accountability.

"The government should also ensure that there will be no wastage and leakages," he said.

When tabling Budget 2014 yesterday, Prime Minister Datuk Seri Najib Razak finally confirmed previous speculation on the impending implementation of the GST to help widen the goverenment's tax base and slash its chronic deficit.

The GST, which will replace the current Sales and Services Tax at a rate of 6 per cent come April 2015, comes, however, amid public concerns that it will increase the cost of living through a hike in the inflation rate, especially after a fuel subsidy cut in September.

To offset the new tax, Najib announced that personal income tax will be reduced by 1 to 3 percentage points, depending on the income bracket.

Najib said the 26 per cent maximum income tax rate will be reduced to between 24 and 25 per cent, effective 2015.

He also said that a one-off payment of RM300 under the 1 Malaysia People’s Aid (BR1M) cash aid programme will be made following the implementation of the GST scheduled for April 1, 2015.

The prime minister added that the GST will not be imposed on essential food items like rice, sugar, salt, and cooking oil; piped water supply; government services like the issuance of passports, licenses, healthcare services and school education; or transportation services like buses, trains, LRTs, ferries, boats, and highway tolls.

Sales, purchases and rentals of residential properties, as well as selected financial services, are also exempted from the GST.

The prime minister pointed out that Malaysia's GST rate of 6 per cent is among the lowest in Asean countries, noting that the GST is fixed at 7 per cent in Singapore and Thailand.

The GST is a consumption tax, meaning all Malaysians will be taxed according to their level of spending, regardless of income. This differs from income tax that is only applicable after a certain salary level is exceeded.

The tax was first announced during Budget 2005 and was originally scheduled to be implemented in 2007, before it was deferred.

The GST Bill was then tabled for the first reading in 2009 for implementation in late 2011, but was withdrawn during the second reading in 2010 following fierce public resistance.

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