THE Goods and Services Tax (GST) is poised to be a game changer for the economy, say economists.
RAM Holdings Bhd group chief economist Dr Yeah Kim Leng said the GST would encourage prudent consumer spending, as those who consumed more would bear a higher tax burden.
He said that the compensatory measure of lowering individual and corporate income taxes would widen the acceptance of the GST among the middle-income groups.
Dr Yeah said lower-income groups would also benefit from the GST as it would not be imposed on basic food items and essential services in addition to the one-off RM300 assistance to BR1M recipient households.
“The GST is just an extension of the sales and services tax. It is not very different, it has just been expanded to a broader spectrum of goods and services,” he said.
He added that the GST was a more efficient tax system.
“This will strengthen our fiscal position and make it more resilient and competitive in the global economy,” he said.
He praised the raising of the income tax bracket, calling it a very welcome measure to help alleviate the middle-income squeeze due to rising living costs.
CIMB Investment Bank economic research director Lee Heng Guie said the Government had taken initiatives to ensure the man on the street would not be burdened by the GST.
He said besides the Competition Act and Price Control and Anti-Profiteering Act, the Government would publish a shopper guide list covering over 900 items to create awareness about product pricing before and after the GST was implemented.
“Consumers have to do their part and be highly vigilant of excessive profiteering and report such cases to the authorities,” he said.
Lee added that it would be good if the Government provided an assurance that it would not increase the 6% rate for at least five years.
University of Nottingham Malaysia Campus school of economics acting head Dr Teo Wing Leong said assistance should be provided to small and medium enterprises (SMEs) to cope with the implementation.
“With a larger revenue, the Government can afford to lower income tax. This will also encourage people to work harder as they will have higher income,” he said.
Master Builders Association of Malaysia president Matthew Tee said the GST would boost government income and increase efficiency in tax administration.
“However, we are disappointed because the reduction of corporate and personal tax of 1% will only be implemented in assessment year 2016 and not earlier,” he said.
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