GST only better for revenue, economist says on tax debate

Free Malaysia Today

16 hours ago

Prime Minister Anwar Ibrahim said last month that Putrajaya would only consider reintroducing the GST once the economy improves and the minimum wage reaches RM4,000 or more.
PETALING JAYA : Economists say the debate on the goods and services tax (GST) versus the sales and service tax (SST) is no longer relevant given the current economic climate, describing the issue as 'exhausted' and 'outdated'.
Economist Geoffrey Williams said the GST only surpasses the SST in terms of revenue collection due to its broader scope of taxable goods and services.
He said the GST naturally generates more revenue than the SST because more goods and services are taxed, and a larger proportion of the population – including lower-income groups – ends up paying it.
'The SST can be a fairer system depending on the tax coverage and design, as essential goods and selected services can be exempted,' he told FMT.
Geoffrey Williams.
Williams also said it was unreasonable to take more money from consumers who were already struggling with the cost of living, especially as incomes remained low.
He said it would be better to wait until average and median incomes increase before imposing a broad-based consumption tax that would disproportionately affect low-income earners.
Williams added that the rise of e-commerce, digital payments, and e-invoicing presented opportunities to introduce new forms of taxation, such as an electronic payments tax, that do not distort consumer spending and can be collected efficiently without placing additional administrative burdens on businesses.
'It's time to move beyond the narrow debate on taxing consumption and explore other options,' he said.
Meanwhile, economist Barjoyai Bardai from Malaysia University of Science and Technology said the SST system could be refined to become more effective and less burdensome for the government.
Barjoyai Bardai.
'We don't need to switch to the GST to achieve this,' he said.
He said that despite the global popularity of the GST or value-added tax systems, some major economies such as the US do not implement them.
'They still use a sales tax, just like Malaysia,' he said.
He urged the government to improve the SST framework by addressing its 'single-stage tax' nature and introducing a credit mechanism to eliminate the cascading effect of tax-on-tax.
'If that can be done, we can lower the prices of goods as they would no longer be taxed multiple times along the supply chain,' he said.
Finance minister II Amir Hamzah Azizan said yesterday that the government had ruled out reintroducing the GST for now, calling it 'impractical' given the current economic conditions.
Speaking as a guest on the Keluar Sekejap podcast, Amir said the government did not dispute the merits of the GST system but believed that it was 'not suitable for now'.
Prime Minister Anwar Ibrahim said last month that Putrajaya would only consider reintroducing the GST once the economy improves and the minimum wage reaches RM4,000 or more.