PETALING JAYA: If the Sales and Service Tax (SST) is to stay, the government must widen its tax net to match the income collected under the Goods and Services Tax (GST) regime, say economists and tax practitioners.
Economist Prof Dr Yeah Kim Leng said it was better for the government to focus on widening the scope and coverage of SST and focusing on taxing items consumed by the upper income groups than to reintroduce the GST.
For the time being, he said it was critical that the government implement measures to operate within the lower revenue collected under the SST.
“To revert back to GST so soon after its abolition will be destructive to businesses and may not be seen as politically wise.
“The government should be given more time to administer under SST with a more disciplined spending.
“And if the government can show its spending effectiveness, the public may be more accepting of putting more taxes into the hands of the government so they can better manage and administer the country, ” he said.
Yeah added that another way was to ensure comprehensive compliance for a full collection of SST.
Tax specialist Dr Choong Kwai Fatt said even if the GST was brought back at 3%, it was irrational and far too simple a solution to address the national deficit and the social economic outcry.
He suggested for a sales tax of 10% to be imposed on manufacturing, 4% on trading and 0% on the trading of essential goods, and for 6% sales tax to be fixed on all services, unless exempted.
“The Malaysian disparity of income calls for a variable rate to address the necessity and importance of the goods and also how luxurious the goods are. This equally applies to services.
“There should also be a mechanism to allow any SST paid between businesses to be exempted and excluded. This would be business- friendly and ease up the cash flow, most importantly avoiding the processing of refund, ” he said.
Choong added that there should also be a single legislation for SST rather than the Sales Tax and Service Tax for a complete integration between businesses.
Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai said that a widened SST could only increase the government revenue by a few billion, and might not reach the level collected through GST.
While the ideal taxation regime should have been the GST, he said the government needed to find other ways of raising revenue since it was maintaining the SST.
KPMG Malaysia executive director Ng Sue Lynn said while the SST rightfully resulted in a lesser burden on the people due to its narrower tax base, it was less transparent compared to GST.
She said improvements could be made to show more clarity and to reduce uncertainties.
“Companies prefer GST for its transparency, provided refunds are quick, ” said Ng.
“For the SST revenue to surpass GST in the years to come, the government might widen the tax.
“And with the Digital Service Tax coming beginning January next year, that will see more revenue coming in.”