Options for bringing back the GST

GOVERNMENTS the world over have expended significant capital in the fight against Covid-19 and will have little choice but to expand their tax base. Malaysia, which had a fairly narrow base to start with, will need to look at the overall structure of its tax system in the longer term.

As the Organisation for Economic Co-operation and Development (OECD) has recommended, a broader review of Malaysia’s tax system will be needed to address the fiscal imbalance caused by the pandemic. All options should be on the table and thoroughly evaluated, and the goods and services tax (GST), as expected, would be part of that discussion.

In the medium to longer term, replacing the sales and service tax (SST) with the GST from a tax policy perspective makes sense.

There are significant challenges to widening a single stage tax like the SST. Recent attempts to widen the scope resulted in a lot of unintended consequences such as multiple levels of tax being paid and confusion about scope. Any decision to widen the SST would need very careful considerations.

Reintroducing the GST would remove all current challenges posed by the SST and would give the government a lot more scope to widen the tax base. That being said, timing is critical and it is important that businesses are given time to stabilise post-pandemic before needing to implement new tax systems.


Indirect Tax executive director,

Deloitte Malaysia

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