GST better than SST, says World Bank

More than 170 countries around the world have adopted some kind of value-added tax or GST system, and that is one reason why the GST is more efficient than the SST, the World Bank Group lead economist Apurva Sanghi said.

KOTA KINABALU: The goods and services tax (GST) is better than the sales and service tax (SST) because the GST widens a country’s tax base and brings in more revenue, says the World Bank Group lead economist Apurva Sanghi.

More than 170 countries around the world have adopted some kind of value-added tax or GST system, and that is one reason why the GST is more efficient than the SST, he said.

“GST is a regressive system because it is based on a tax on consumption and 60% of the economy depends on consumption.

“Early analysis shows that GST provides nearly twice as much tax revenue (compared) to SST. It is also self-billing because businesses must issue invoices to claim a refund,” he said in an online conference yesterday.

The conference was held in conjunction with the launch of the Malaysia Economic Monitor report, entitled Catching Up: Inclusive Recovery and Growth for Lagging States, scheduled for June 16 in Kota Kinabalu.

“Some countries use tax exemptions to address the regressiveness of the GST but in our view, tax exemptions may not be the best option.Instead, the government should increase the targeted spending to those affected,” Apurva Sanghi said.

Also present at the conference was World Bank country manager for Malaysia Dr Yasuhiko Matsuda.

Apurva said the GST is not without its shortcomings.

One of which, he said, is that the lower-income households consume more than the regular households, which would affect them if a regressive tax system based on consumption like the GST were implemented.

“Some countries use tax exemptions to address the regressiveness of the GST but in our view, tax exemptions may not be the best option.

“Instead, the government should increase the targeted spending to those affected,” he said. — Bernama