Thursday, November 28, 2013

GST net gain may be less, says tax expert


| November 28, 2013

The collection will be affected by government's move to reduce income taxes and how it will respond to corporates which are seeking to expand the zero duty list.

by Tanu Pandey

PETALING JAYA: A tax expert said the Goods and Services Tax (GST) may not increase overall government revenues as much as expected because any collection will be affected by the lowering of the income tax and how the government react to lobbying from businesses to expand the zero duty list.

The GST, which is to come into force in April 2015, will replace the indirect taxes like Sales and Service Tax and impose a common tax at 6% on a host of items, even on many that have escaped any duty till now.

However, there will be many essential items like food which will be exempt from GST or be in the zero-rated list.

“There will be more lobbying to get items into the zero-rating. Also, it is quite strange that the prime minister or some other ministers said we are ready to listen if someone wants to get some goods in zero-rating. That may be politically correct but is a highly risky act if that happens,” Taxand Malaysia Sdn Bhd chairman Veerinderjeet Singh told The Malaysian Reserve yesterday.

Veerinderjeet was speaking to the newspaper on the sidelines of Malaysian Institute of Accountants Conference 2013 in Kuala Lumpur where he was also among the panel members and other delegates from the accounting profession who were attending the twoday conference. The conference ended yesterday.

GST is expected to contribute about RM6 billion in addition to the current earnings of RM16 billion to the exchequer from indirect taxes. “Net gain from GST will be less…At the end of the day it is not going to be a substantial increase,” he said.

In preparation for bringing about GST in the country, the government reduced corporate income tax rates to 24% in 2016 from current 25% and personal income tax rate reduced by 1% to 3% starting 2015.

Terming the income tax reduction as a “bold step” from the government, he said, “It is not necessary we could reduce it later. We need to see how GST works because it takes a few years for the issues, anomalies and perceptions to be cleared (on GST).”

In fact, about the opposition from the business community on GST, he pointed out that it happened as the government failed to educate and inform.

“The public relations policy of the government needs to be really looked at. That was why in the five years, since 2007 when the GST came into discussion, we have allowed a lot of misconceptions to grow in the minds of the people and now it is a challenge to try and erase those perceptions. We could have done it better,” he said.

Meanwhile, Veerinderjeet expected Malaysia’s corporate income tax rate and maximum personal income tax rate reduced to 20% by 2020 while GST will be raised to 10%.

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