Experts support return to GST
crazyfrog last edited by
PETALING JAYA: The idea to reintroduce the goods and services tax (GST) to cushion the government’s coffers amid the prevailing lower oil price, uncertain economic growth from the continuing US-China trade war and the country’s high indebtedness has received support from some experts.
However, they said that the government of the day must learn from the mistakes of the past government namely on the implementation of GST tax refunds which must be done in an honest and transparent manner.
“The delay in GST refunds was cited by most companies, especially the small and medium enterprises (SMEs) as affecting their cashflow.
“This calls for greater transparency and governance structure in the audit process to ensure a timely refunds of GST credit to traders and manufacturers.
Lee said the extra revenue collected from GST along with the huge cost savings from the expenditure efficiency and good governance of spending would provide support for the government to finance public expenditure.
“The weak enforcement of price surveillance during the GST implementation and inadequate consumer awareness or lack of information about the GST had caused unwarranted cascading price effects on consumers, especially hitting the pockets of low-income households though basic necessities were exempted or zero-rated,” Lee said.
“Some still perceived GST as a form of regressive consumption tax with the lower income households paying more relative to higher income households spending on the same amount of goods and services. However, to ease the burden of lower income households, basic necessities were exempted from GST or placed under GST exempt-supply, ” Lee added.
He noted that the long list of exempted and zero-rated goods and services then had created a situation where certain industries lobbied for better treatment.
“In this regard, the reintroduction of GST must take into account the simplicity of GST rate in terms of exemptions to ease the compliance cost and smooth implementation.
“For a start, the GST rate should be set at 3%-4%, taking into its impact on revenue and its socio-economic impact on the targeted vulnerable groups, ” Lee said.
Meanwhile, AMBank Research’s chief economist/head Anthony Dass said the reason why the implementation of the GST was unsuccessful in the first instance is partly due to the argument that it resulted in higher prices of good and services.
“However the economy was already facing rising prices at the time GST was introduced. It was at that time when subsidies were rolled back like for cooking oil, flour and sugar. So it was fairly a wrong timing to roll back subsidy when introducing GST. Besides, there was the issue of slow reimbursement which affected businesses cashflows, ” Dass said.
Dass stressed that the government must be very efficient with reimbursements this time so that the cost of doing business is not affected.
“The reimbursements must be met within the deadline. Failing which businesses could see their goods and services either with receipts or without receipts, this creates a ‘hidden’ two tier pricing repeating what happened in the past, ” Dass said.
He said that GST is a far more stable, efficient, transparent and effective revenue source that cannot be ignored.
“If there is a plan to introduce GST, it will have to be ‘revenue neutral’ with a broader base as opposed to ‘revenue generation’ being the major objective. Besides, the sales threshold should be set higher say sales turnoff RM1mil and above as compared to the past where the threshold was RM500,000 level, ” Dass said.
He said that with the current challenging economic environment could imply that a 6% GST rate may be steep and added that a more appropriate level is at around 2%-3% with more neutral base focus rather than revenue generation focus.
Federation of Malaysian Manufacturers (FMM) said in a press release that the GST is ‘positive’ for the prices of Malaysian exports as they will become more competitive on the global stage.
“This is because no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain. This strengthens our export industry, aiding Malaysia’s progress, ” FMM president Tan Sri Soh Thian Lai said.
Soh suggested that a re-implementation of the GST be done at a lower rate of 3% to boost business conditions which would lead to higher investments and employment opportunities as well as higher disposable income for the people.
“All essential goods and services should also be zero-rated and the government should reduce tax compliance burden by increasing the GST registration threshold to RM1mil, ” Soh said.
He said that the government should also minimise delay in refunds especially for exporters and businesses with zero-rated supplies as the long refund period between six to eight months had rendered the GST into an accumulating tax burden.
“I suggest an inclusion of the provision of interest on late payments and refunds in the GST legislation to ensure strict compliance to the client charter and integrity of the system, ” Soh said.
supermario last edited by
Looks like the government only listens to some things and not others.
hola55 last edited by
I do see a lot of support for 3% GST.
elixir last edited by
Obviously their dreams didn't come true.