Bring it back: The GST was introduced in April 2015 but scrapped three years later. — NORAFIFI EHSAN/The Star
KUALA LUMPUR: With RM500bil in tax leakages and the federal debt reaching RM1.2 trillion, it is time the government reintroduced the Goods and Services Tax (GST), says the Malay Chamber of Commerce Malaysia (MCCM).
Its president Norsyahrin Hamidon said reintroducing the GST will increase the government’s income and it will be able to directly inject the additional revenue into people’s pockets by providing them with monthly cash aid.
However, he said the MCCM proposed the GST be reintroduced at a lower rate of 2% this time around, instead of the previous 6%.
Norsyahrin said being without the GST has led to RM500bil in tax leakages, which is equivalent to 30% of the country’s gross domestic product (GDP).
“Unregulated ‘shadow economy’ activities are not only harming the country and the people, but also contributing to the increase in corporate and commercial crime, as well as the country’s failure to fight corruption.
“We proposed firstly for the GST to be reintroduced at a 2% rate.
“Secondly, a big portion of the GST revenue should be returned to the people in the form of monthly cash aid.
“And thirdly, we proposed for the corporate tax for micro, small and medium enterprises (MSMEs) to be lowered from 15% to 10%,” he told a media conference after a round-table discussion at the MCCM office here yesterday.
Norsyahrin said the MCCM is hopeful that the government would announce the proposed initiatives in the upcoming Budget 2024 which is scheduled to be tabled in October.
He said given that the GST – or consumption-based taxation in general – is recognised worldwide as the “most efficient tax regime”, it is only logical to reintroduce it, adding that the government needs to understand issues haunting small businesses.
“We understand that some people might not welcome the idea of having the GST back, but the reason they have this perception is because they don’t understand the essence of GST and why developed countries adopted it.
“The irresponsible shadow economy is unfair to registered business owners who always adhere to their responsibilities by paying taxes.”
The “shadow economy” refers to work, business or trade that is undeclared. It includes informal sectors as well as criminal activities.
Norsyahrin added that while the MCCM understands the government’s struggle in paying off federal debts, especially due to the two-year lockdown caused by the Covid-19 pandemic, Putrajaya must also understand the plight of the business community.
He said the business community has been hit hard as the purchasing power of consumers continue to decline while the cost of goods is increasing.
“But at the same time, daily wages and salaries remain low.
“With the expected deficit rate exceeding 6% this year, we demand that the government continue to prioritise the welfare of the people by providing fiscal allocations that are more in line with their needs.
“For example, this can be done by setting a target of 5% of GDP for health expenditure in addition to optimising public and private healthcare services which are now at a critical level,” he added.
Under the current Sales and Services Tax (SST), which has a narrow tax base, there is a tax of between 5% and 10% on the sale of goods, while services attract a 6% levy.
In comparison, the former GST regime covered a broader range of items and services with the rate set at 6%.
The GST was introduced in April 2015 by then Prime Minister Datuk Seri Najib Razak but scrapped three years later during the Pakatan Harapan administration in 2018 under Tun Dr Mahathir Mohamad’s leadership.
