IMF says govt has taken impressive efforts on public awareness of GST

  • Business
  • Tuesday, 16 Sep 2014

THE Government has taken “unprecedented’ steps to ensure the smooth implementation of the Goods and Services Tax (GST) come April 2015, experts say.

They noted that public awareness on the impending change over from the current sales and services tax (SST) was high, thanks to a massive publicity blitz that included traditional main stream media outlets as well as through the innovative use of social media platforms.

Meanwhile the Customs Department has already conducted several dry runs to fine tune its GST computerisation system, which has won high praise from the International Monetary Fund (IMF).

“To successfully conduct dry runs a year ahead of the implementation is quite unprecedented. The level of preparation by the Government to implement the GST is very impressive,” IMF fiscal affairs department adviser Kiyoshi Nakayama told an international seminar on GST

Nakayama also noted that measures such as direct cash payment to targeted groups under the 1Malaysia People’s Aid (BR1M) scheme as well as raising the threshold for personal income tax would help increase public buy-in to the GST.

The GST, which will replace the SST system, is aimed at creating a more efficient and fairer tax system. The Government, however, plans to exclude certain products, such as food items and housing from the GST.

Countries, such as the UK, had made similar tax concession that an expert said contributed to the tax success in the country.

As it is, with the value added tax (VAT), the version which the consumption tax system is known in the UK, contribution to the gross domestic product had risen from 2% when it was introduced in 1973 to 6.5% last year.

But more surprising is the high level of acceptance of the VAT system in the UK.

“It is, in fact, one of the most successful taxes in the UK,” according to Simon James, an associate professor in economics at the University of Exeter Business School in the UK.

“The increase of the VAT rate to 20% in January 2011 from 17.5% previously aroused remarkably little protest or resistance as compared to many other tax changes,” he said.

He also noted that based on studies, it can be concluded that the VAT or GST scored very well compared to other taxes in terms of economic efficiency and acceptability to taxpayers.

The GST can also function as a very effective stabilisation policy.

James noted that the VAT in the UK was temporarily reduced from 17.5% to 15% in 2009, as one of the measures to counter the economic downturn at the time.

The lower VAT helped increase consumption almost immediately, while other form of taxes, such as personal income tax or corporate tax, he said, usually had a more lagged effect.

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