Relook, review current tax policy and reinstate GST

THE Institute of Strategic Analysis and Policy Research (Insap) urges the Malaysian government to review its current tax policy and reinstate the Goods and Services Tax (GST) as a superior alternative to the combination of High-Value Goods Tax (HVGT), Low-Value Goods Tax (LVGT), and Sales and Service Tax (SST).

In echoing recent remarks by Datuk Koong Ling Long, treasurer-general of the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM), Insap said that it has consistently recommended GST as a better tax system and has advocated its reintroduction since last year, recognising its potential to establish a more sustainable and equitable tax system.

INSAP Chairman Datuk Dr Pamela Yong's recent statement dated 31 January 2024 in The Star reiterated this position based on government revenue figures and feedback from the business community and Malaysians in general who felt that there is no need for the government to introduce a range of new taxes and rush to remove petrol subsidies if the country’s tax regime is robust. She added that the GST regime is a more efficient alternative to the combination of HVGT, LVGT and SST.

“We commend the collective voice of experts and industry players who have raised their concerns so far. Unfortunately, these calls have yet to be addressed by the government," said Dr Yong.

We believe that the current system is riddled with inefficiencies. For example, the HVGT is a mere fragment of the SST which boasts an ambitious claim of generating RM700mil a year - which falls far short of the government’s objective of boosting its sources of revenue. At RM700mil, it represents only 1.6% of tax revenue that the GST generated in 2017 (RM44bil). Due to its limited scope which targets only high-value goods, the HVGT suffers from a narrow tax base. This significantly restricts the government's ability to increase tax revenue significantly. Additionally, the HVGT's implementation mechanism lacks clarity. The classification of certain goods, such as precious materials like gold, under the HVGT, remains ambiguous, creating confusion and administrative burdens for businesses.

The current tax system, which is a combination of taxes, fails to translate to meaningful income tax reductions for the rakyat. This rollback to the pre-GST era with SST represents a significant step backwards. SST creates a “tax-on-tax” effect by taxing businesses on previously taxed inputs and this cascading compounding effect of the SST structure artificially inflates prices for the consumer and the common people. GST however, ensures a fairer and more transparent system where the final consumer will not suffer from double taxation.

In view of this, Insap has initiated a petition for Malaysian companies, business owners as well as the Malaysian public to support this call for the government to reintroduce GST and streamline the tax structure, which would bring about more efficient tax collection (revenue for the government) and also eventually enable to the government to reduce personal and corporate income tax in the future.

Let's make our voices heard! Join our movement in calling for the return of GST. Sign our petition at www.insap.org.my or click here https://forms.gle/6k6j976cVR9DuB8BA

INSTITUTE OF STRATEGIC ANALYSIS AND POLICY RESEARCH (INSAP)