PETALING JAYA: Malaysia would be the first country to revert from the Goods and Services Tax (GST) to the Sales and Service Tax (SST).
The humongous effort can be carried out within the first 100 days of the new administration provided the necessary legal framework is in place.
Senior tax consultants said the law governing GST has to be repealed and a new law on SST has to be passed in Parliament.
“For this to happen, a Parliament sitting must take place. Legally the GST cannot be replaced with the SST overnight,” said the tax consultant.
The GST, which is based on a 6% rate, was implemented on April 1, 2015 based on the GST Act 2014.
The laws that governed the SST, which are the Sales Tax Act 1972 and the Service Act 1975, were repealed.
The abolishment of GST is the cornerstone of Pakatan Harapan’s economic plan.
In a press conference yesterday, Tun Dr Mahathir Mohamad reiterated he would go ahead with the move.
The chief executive officer of Tax Advisory and Management Services Yong Poh Chye said the sooner the promise to abolish the GST is done, the better it is for the new government.
“The people will feel the new government is serious in carrying out its promises,” he said.
Yong also said without GST, the general price of goods and services should be lower.
“There should also be strict enforcement to ensure shops lower prices to the pre-GST era. Otherwise the effect would not be felt,” he said.
He also pointed out the reintroduction of the SST should be easier because the tax has been implemented before. The SST was between 5% and 10%.
“We will not be reinventing the wheel,” he said.
Some experts had warned that rolling back the GST would be disastrous for the economy.
Rating agency Moody’s Investors Service cautioned abolishing GST without offsetting measures would increase Malaysia’s reliance on oil-related revenues and, in the near term at least, narrow the government’s revenue base.
Now on his sixth term in office, but the first time as a leader of a coalition of mostly former political nemesis, Dr Mahathir has achieved what many believed was the impossible – beating Barisan Nasional in a general election.
Pakatan leaders during their campaign in the run-up to GE14 had repeatedly said doing away with the GST will help reduce prices in the market.
The GST was implemented as part of former prime minister Datuk Seri Mohd Najib Tun Razak’s efforts to widen the country’s tax base.
GST collection in 2017 was RM42bil and is expected to increase to RM44bil in 2018. To compare, SST collection in 2014 was RM17bil.
Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar, who is also a former minister under Najib’s administration, said days before GE14 that abolishing the GST will force the Government to look at other ways to plug the income gap, or risk widening the country’s budget deficit.
“While good for the new government’s popularity, this will have a significant fiscal impact that can affect Malaysia’s risk ratings,” Francis Hutchinson, coordinator of the Malaysian programme at the Institute for Southeast Asian Studies in Singapore, told Bloomberg.