GOODS and Service Tax (GST) is tax on what is spent and not on what is earned. Earlier on March 30, 2010, Prime Minister Datuk Seri Najib Tun Razak unveiled the New Economy Model (NEM) and it recognises that a wider tax base is an important part of reforms, where the introduction of GST is a key component. It was reported that a more diversified tax base is needed to compensate for an expected future reduction in the share of revenue from oil and gas.
Najib will make his Budget 2014 speech on Oct 25 and the long overdue GST is likely to be a major part of a package of tax reforms. Malaysia’s household debt to GDP was 83% in mid-2013 compared with 70% in 2009. Policymakers and tax analysts too consider its introduction inevitable, particularly given the paradigm shift in tax policies worldwide in favour of indirect taxes. More than 160 countries worldwide have already introduced GST (known as VAT in European countries) and more than 90% of countries have some form of GST exposure.
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