Malaysia should reintroduce GST at rate that won't burden people, says economist
KUCHING (June 13): Malaysia should reintroduce the Goods and Services Tax (GST) because it will provide a 'sustainable and predictable source of revenue', said economist Datuk Dr Madeline Berma.
The Institut Masa Depan Malaysia (Masa) fellow said GST is a broad-based value-added consumption tax that offers a transparent, efficient, and stable long-term revenue stream.
'Malaysia should consider reintroducing the GST but at a rate that would not burden the people,' she said when contacted.
'This will meet our growing development, spending needs, and strengthen fiscal resilience, while helping the country reduce its fiscal deficit and lower the government's debt ratio substantially.'
On Putrajaya's expanded Sales and Service Tax (SST), which is scheduled to take effect in July, Madeline said it is 'less revenue-generating but more manageable for businesses and consumers'.
She opined that the SST system is more targeted and fairer, giving greater focus on those who spend more for non-essential goods and services.
'It is expected to improve Malaysia's fiscal position through a more targeted tax approach on non-essential goods.
'The government's decision to focus on imposing taxes on luxury goods and non-essential items means that only the high-income earners would be directly affected. But the low- and middle-income will be affected indirectly, with the implementation of SST on six new categories of services,' she said.
The services affected by the expanded SST are leasing and rental, construction, finance, private healthcare, education, and beauty.
She pointed out SST will impact nearly all manufactured goods and services, where the tax on capital goods is expected to increase investment costs, delay business expansion, and dampen investment across key manufacturing and commercial sectors.
The Federation of Malaysian Manufacturers has estimated that logistics, manufacturing, and retail businesses relying on rented premises could see annual costs increase from RM24,000 to RM60,000 per premises, which may be passed onto consumers or force businesses to scale back operations, she said.
Madeline said with the expansion of the SST, government revenue is expected to rise from RM46.7 billion in 2024 to RM51.7 billion in 2025, creating the fiscal space for targeted subsidies or incentives.
This could support further enhancements in public services, particularly in expanding cash assistance to the people and improving infrastructure and service delivery nationwide, she said.
'This measure forms part of the government's broader Madani economic framework aimed at 'raising the ceiling' and 'raising the floor' in its effort to strengthen Malaysia's social safety net and promoting targeted taxation without increasing the cost of living for the general public,' she added. GST lead Madeline Berma SST
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