KUALA LUMPUR: The current sales and service tax (SST) framework will be retained and enhanced as it remains a more targeted regime that shields most Malaysians from broader levy burdens, says Prime Minister Datuk Seri Anwar Ibrahim.
Anwar, who is also Finance Minister, said the government believes the approach allows consumption taxes to remain targeted, with essential goods and services commonly used by the majority of Malaysians remaining exempt from tax.
Retaining the SST also delivers fiscal benefits more quickly, whereas reintroducing the goods and services tax (GST) would require a preparation period of up to two years to allow companies to update their systems, he said in a parliamentary written reply dated Tuesday (June 30).
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"Both the GST and SST are forms of consumption tax. However, GST has a direct impact on all Malaysians, including those in the B40 income group, whereas SST is a more targeted system that has been used in Malaysia for more than 40 years and is well understood by industry, businesses and the public.
"The government recognises the merits of GST. However, it does not consider this to be the right time to reintroduce the tax, given current income levels and cost-of-living challenges faced by Malaysians.
"GST would also have a broader impact on the majority of the population," he told Datuk Seri Dr Wee Ka Siong (BN-Ayer Hitam), who asked about the government's strategy to address for the fiscal trap in which subsidy costs are no longer sustainable, yet cannot be abolished without burdening the people.
Dr Wee also asked if Putrajaya would reconsider reintroducing GST as a structural revenue mechanism in place of the multi-layered SST framework.
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Anwar also said Putrajaya uses revenue from the Consolidated Fund, including proceeds from the SST, to finance government expenditure undertaken by ministries, departments and agencies.
"This includes welfare programmes, infrastructure development and initiatives to address the cost of living in line with the Madani Economic Framework to raise living standards.
"Among these measures are fuel subsidies, Rahmah assistance, the Rahmah Sales programme, early schooling assistance and the My50 monthly public transport pass," he said.
He added that, to accommodate the increase in subsidy expenditure arising from the global supply crisis, the government has reprioritised its annual spending to focus on programmes that deliver the most benefits to the people and the economy.
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At the same time, it has strengthened fiscal discipline through tighter control of operating expenditure, greater efficiency in public spending and measures to reduce leakages in programme implementation and subsidy distribution, he said.
"The government also continues to strengthen national revenue through fiscal reforms and by broadening the revenue base to create greater fiscal space.
"These efforts enable the government to maintain various assistance and social protection programmes, including cash aid, cost-of-living assistance and subsidies for essential goods and services.
"Our priority is to ensure that Malaysians continue to be protected should the current crisis persist, particularly those most affected by rising living costs and global price increases," he said.
