PETALING JAYA: Some RM11bil may be put in the hands of Malaysians during the current three-month tax holiday period, following the zerorisation of the goods and services tax (GST).
According to KPMG Tax Services advisor for indirect tax Datuk Tan Sim Kiat, consumers’ purchasing power is expected to improve after the GST is zero-rated, leading to a significant multiplier effect within the domestic economy.
“Based on the RM42bil GST revenue collected in 2017, Malaysians have paid about RM3.5bil on average for the consumption tax monthly. Now that the sales and services tax (SST) will only be introduced on Sept 1, we expect Malaysian consumers to have an extra RM3.5bil to spend per month from June to August.
“With no tax being paid on the goods and services in the three-month period, we are likely to see more spending power among the rakyat,” Tan told reporters after KPMG’s workshop on the transition from GST to SST regime.
He added that even with the introduction of SST in September, Malaysians’ purchasing power is unlikely to be affected significantly. However, it will be contingent upon the government’s mechanism to implement SST, which is yet to be announced.
Under the SST, selected goods and services will be taxed at a particular stage of supply chain. In contrast, the broad-based GST was imposed at every stage of business transactions.
Prior to the introduction of 6% GST back in April 1, 2015, the country practised the SST regime for over three decades.
“A single-level tax will place less burden on consumers and boost spending power, although the government may be on the losing end by forgoing the 6% GST revenue.
“The government can re-use the SST model introduced in the 1970s for an easier implementation and to reduce the monetary impact on the rakyat. However, if the government seeks to increase its revenue from SST, it can tweak the model by raising the tax rate and expand the coverage of goods and services under the tax regime, among others,” Tan pointed out.
The previous government under Barisan Nasional projected a total GST collection of about RM44bil in 2018. With the GST now zerorised and SST only to be introduced in September, the country is expected to see a significant revenue shortfall.
In an earlier note, Alliance Bank chief economist Manokaran Mottain estimated a net revenue deficit of RM14.9bil this year.
“The Finance Minister should find the right way to balance between revenue generation for the national coffers and to reduce the impact on consumers,” he said.