SMEs prefer GST over SST, says think tank


AN INDEPENDENT think tank wants the government to reintroduce GST in place of the SST, saying GST was the preferred choice of taxation for various business associations due to its transparency and fairness.

Insap said it was of the view that the SST and proposed new taxes such as the Low-Value Goods (LVG) and High-Value Goods (HVG) taxes, introduced in January 2024 and from March 1, respectively, disproportionately impact vulnerable groups.

“The priority is to address the people’s burden in having to face a downturn in the global economy," Insap chairman Datuk Dr Pamela Yong said.

The full text of Insap's statement can be read below:

The Institute of Strategic Analysis and Policy Research (INSAP) wants the government to reintroduce the GST in place of the SST.

This is in view of the government’s half-hearted attempt to boost its revenues with the introduction of the Low-Value Goods (LVG) tax in January 2024 and the High-Value Goods (HVG) tax in March later in the year.

Insap chairman Datuk Dr Pamela Yong said, “Through our dialogues with the various business associations, GST is still the preferred choice of taxation system due to its transparency and fairness.”

The abolishment of the GST in 2018 resulted in a significant revenue shortfall as a recent article published by INSAP highlighted that the GST generated a robust RM44bil in 2017, contributing significantly to the national coffers.

It has been estimated that the GST, had it not been abolished, would have collected around RM63.5bil instead of RM 35.8bil in 2024.

MCA president Datuk Seri Dr Wee Ka Siong has also recently highlighted that the GST is a far more efficient tax system than the SST.

Even with proposed expansions like the LVG and HVG, SST is projected to fall far short, raising concerns about the government's ability to meet its financial obligations.

The LVG is only expected to collect, at best, RM200mil to RM300mil per annum compared to 2024 GST collection estimates of RM63.5bil.

Insap is of the view that the SST and proposed new taxes like the LVG and the HVG also disproportionately impact vulnerable groups.

By focusing on specific goods and services, these measures often place an undue burden on lower- and middle-income groups (B40 and M40) who rely on those goods and services.

This regressive nature of the taxes contradicts the government's stated goal of promoting social equity and inclusive economic growth. GST is well recognised in many advanced countries to have far better outcomes in terms of collection due to its broadband nature.

Dr Yong says that “it was a grave mistake to have abolished the GST in 2018 in the first place".

“The priority is to address the people’s burden in having to face a downturn in the global economy. This requires stimulus packages and additional fiscal spending which could have been well supplemented by the GST, had it not been put to an end by Pakatan Harapan 1.0.

“It is time for Malaysia to put political expediency in the back seat, swallow our pride and reinstate the GST for the sake of the people.

“LVG and HVG are band-aids just to plaster over the weaknesses of the SST but the GST is the real deal in getting our federal budgets to an even keel,” she said.

Please also refer to Insap's paper “Why Malaysia's Proposed LVG Tax Misses the Mark” at this link: https://insap.org.my/quick-economic-update-why-malaysias-proposed-lvg-tax-misses-the-mark.

The Institute of Strategic Analysis and Policy Research (Insap), established in 1986, is one of the pioneer think tanks in Malaysia, focusing on political-economic research. A not-for-profit organisation, Insap develops long-term strategies and policies which are relevant to the interests and aspirations of Malaysians.

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Insap , GST , SST , Reintroduction

   

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