FMM president Tan Sri Soh Thian Lai is hopeful that the GST will be set at a rate that will not burden the rakyat, yet be capable of widening the government’s revenue base to lower its debt ratio and accelerate the pace of fiscal consolidation.
PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) believes that the reintroduction of the goods and services tax (GST) will support a stronger economic revival and be a more effective tax regime compared with the current sales and service tax (SST).
FMM president Tan Sri Soh Thian Lai is hopeful that the GST will be set at a rate that will not burden the rakyat, yet be capable of widening the government’s revenue base to lower its debt ratio and accelerate the pace of fiscal consolidation.
Citing a survey carried out by the FMM on the GST in May 2020, Soh said a total of 499 companies had “strongly supported” the call to replace the SST.
He pointed out that the GST would provide a fair tax structure and eliminate cascading and compounding of taxes commonly found in the SST regime.
“In addition, prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while the GST incurred on inputs can be recovered along the supply chain.“As the broad tax base system will increase indirect taxes, it will give the flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination,” he pointed out.
The reintroduction of the GST or GST 2.0 should not be considered in isolation, but as a part of the holistic assessment of Malaysia’s tax systems and the country’s fiscal position.
“While the introduction of a broad-based consumption tax would strengthen the country’s fiscal position, GST 2.0 must be easy to manage and also not increase the cost of doing business.”
Soh urged the government to consult all stakeholders for a thorough review to ensure the effectiveness of the tax regime.
“Switching back to the previous automated model under the GST tax payers access point system will not be difficult. As the GST compliance systems are already in place, companies have asked for a six-month transition period to change from the current SST to GST 2.0 based on our May 2020 survey.”
FMM is calling for the new GST rate to be reduced to 4% to encourage conducive business conditions.
Soh said this would lead to higher investments and employment opportunities, as well as a higher disposable income for the rakyat.
“Gradually bring down the corporate tax rate to 20% and zero-rate all essential goods and services,” he said.
Meanwhile, Bernama quoted former director-general of the Royal Malaysian Customs Department Datuk Seri Subromaniam Tholasy as saying the GST must be implemented in a targeted manner so as not to burden the people. He said the GST imposed at 6% previously should be extended to goods tax at 5% and service tax at 7%.
“The government needs to look back at zero-tax items where this time it should only be limited to basic items,” he said during the Malaysia Petang Ini programme on Bernama TV yesterday.
Subromaniam said if the tax rate was set too low at op to 4%, it would only contribute to neutral income, while higher rates could increase the country’s income and finances, and raise the stock market.
“It will directly impact the strength of the ringgit against the US dollar,” he explained.
The GST should take into account the appropriate timing, strength of the ringgit as well as public policies provided by certain ministries besides ensuring that inflation could be controlled.
“The previous implementation of the GST in 2015 had several weaknesses such as subsidy reduction, rationalisation of electricity tariff rates and the depreciation of the ringgit which caused the consumer price index to increase.
“The current consumer price index is rising but it does not translate into more revenue for the government because the impact of SST only reaches the import and manufacturing level for goods compared with the GST which affects up to the retail level,” he said.
Apart from that, Subromaniam also suggested that the government not set the threshold value too low as before at RM500,000 so that small businesses are not included in the implementation of GST.
“Maybe we can see a threshold value that is more suitable with a rate of between RM1mil and RM2mil so as not to burden businesses like a regular grocery store,” he said.
He said GST is a very efficient, transparent and fair and business-friendly taxation system that can improve the country’s economy and provide stronger competitiveness to the country’s exports.
“Therefore, GST will definitely stabilise the price of goods in the long run,” he added. - Bernam
