GST for Malaysia inevitable

October 05, 2012 12:21 PM

GST, Most Effective Way For Government To Create New Revenue Stream, Says Consultant

By Prem Kumar Panjamorthy

KUALA LUMPUR, Oct 5 (Bernama) — The proposed goods and services tax (GST) is the most effective mechanism for the government to create new revenue stream while reducing dependency on earnings from petroleum, says tax consultant Yong Poh Chye.

New revenue streams were vital as the government needed to provide better amenities, services and benefits to Malaysians, said the executive director of Tax Advisory and Management Services Sdn Bhd.

“From what we know, relevant government departments provided briefings and training for the workforce related to the GST implementation,” he told Bernama.

Yong, one of the country’s leading tax consultants, said the government has yet to introduce the GST as it wanted the people to be fully aware of the positive impact of the new taxation system.

“This is different from many other countries which implemented new taxes just after related announcements,” he said.

The government has gradually reduced dependence on oil-related revenues, where a lower dividend of RM28 billion was imputed for 2012 from Petroliam Nasional Bhd, compared with RM30 billion in 2011.

This dividend may be further cut by RM3 billion to RM27 billion next year.

Yong said a clearer mechanism on the implementation of GST was expected to be tabled next year after the government had created ample awareness levels on the new taxation system.

After the GST Bill is gazetted, it would take up to about 18 months before the new tax gained its effectiveness, he said.

“That means if the GST Bill is passed in Parliament late next year, the new tax will only be enforced in 2015,” he said, adding that the government should start an awareness campaign on the positive aspects of the GST.

Yong said a three per cent tax threshold would be the ideal level to introduce the GST, a far lower figure compared to the United Kingdom and Ireland, which had imposed the GST at 20 and 23 per cent, respectively.

“Three per cent should be the best percentage to start with. Anyhow, it is still much more lower than the current service tax at six per cent that Malaysians pay,” he said.

The GST Bill was first tabled in Parliament in December 2009. Initially proposed to be enforced in the third quarter of 2011, the GST is aimed at widening the tax base and reducing the country’s deficit.

Prime Minister Datuk Seri Najib Tun Razak had stressed in the past that the GST needed to be properly explained and that the broad-based consumption tax was the way forward for Malaysia.

Many economists had also said that Malaysia needed to shore up its revenue base and one of the best ways was via the GST.

There have also been views that the GST will lessen opportunities for tax evasion. Over 140 countries have implemented the GST.


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