Latest news with #MohdFairuzARazak
The Star
28-06-2025
- Business
- The Star
SST better suited for post-pandemic economy
MALAYSIA'S upcoming implementation of the revised Sales and Service Tax (SST) on July 1 has reignited public concerns over possible increases in the cost of living and inflationary pressures. Memories of the Goods and Services Tax (GST) era remain fresh, raising questions about whether the new SST model will be more sustainable or merely a repeat of the past. However, tax experts say the SST, in its current form, offers a more targeted and less burdensome approach — particularly for lower- and middle-income households. According to Malaysian Association of Tax Accountants (MATA) deputy president Dr Mohd Fairuz A Razak, unlike GST, the SST is not imposed at every stage of the supply chain. 'GST was a multi-stage tax, which affected almost every level of transaction — even basic goods — unless they were zero-rated,' he said. 'In contrast, SST is a single-stage tax, typically applied at the manufacturing or service-provider level. This avoids the risk of cascading taxes or 'tax-on-tax' scenarios.' Mohd Fairuz noted that SST is not imposed on most essential items such as rice, vegetables, fish and medication, offering greater relief for households in the B40 and M40 groups. 'For example, items like sanitary pads and soap, which were previously taxed under GST, are now exempt under SST. This has a direct impact on household spending and cost-of-living management,' he said. The simplified structure also helps stabilise retail prices, as goods are taxed only once in the supply chain. In addition to being consumer-sensitive, the SST system is seen as more friendly to small and micro businesses. 'The registration threshold for SST is RM500,000 in annual turnover. This means many micro and small enterprises, especially those just starting out, are not required to register or collect taxes,' Mohd Fairuz explained. This, he said, helps reduce compliance costs and complexity for small vendors, especially those operating in night markets, roadside stalls, and informal sectors. 'SST also eliminates the need for complex accounting systems. Small businesses can rely on basic bookkeeping, without investing in expensive ERP or tax software,' he added. This simpler compliance structure, he said, gives confidence to small traders to formalise their operations without fear of burdensome regulations. Mohd Fairuz also highlighted how SST places more emphasis on discretionary or luxury items, rather than daily essentials. 'Luxury bicycles, imported fruits, salmon, five-star hotels, insurance and entertainment services are among those that will be taxed. These are typically consumed by higher-income groups who can afford to pay more.' 'This approach is more equitable and aligns with the principle of progressive taxation,' he said. From a broader perspective, the reintroduction and expansion of SST is part of a larger fiscal reform agenda, one that aligns with Malaysia MADANI's core values of compassion (ihsan), responsibility, and justice. Mohd Fairuz said the SST structure encourages wealthier Malaysians to contribute more to national revenue, while ensuring that vulnerable groups are not unduly affected. 'It is a more socially conscious tax model. While GST might have generated more revenue, SST strikes a better balance between collection and citizen well-being—especially in a post-pandemic recovery period,' he said. He also pointed out that SST is easier to monitor and less susceptible to fraud, due to its simpler design. 'Revenue collected can go directly into funding targeted subsidies, public healthcare, education and infrastructure.' While SST may not bring in as much revenue as GST, Fairuz argued it is a more sustainable tool for long-term fiscal management. Looking ahead, he said there's still room for improvement. 'The government should continue exempting essential goods, while synchronising SST with digital systems like e-invoicing to enhance transparency.' 'There's also a need to review SST thresholds and rates periodically and consider introducing limited input tax credits for certain industries.' Ultimately, he added, taxation systems should be designed not just to raise revenue — but to serve the people. 'When implemented with care, SST can be a key fiscal instrument rooted in Madani values — fair, transparent and people-centric.'
Sinar Daily
18-06-2025
- Business
- Sinar Daily
SST is good but needs improvement, experts say
SHAH ALAM - Economic experts believe that the Sales and Services Tax (SST) is still considered the best system for implementing targeted taxation in the country, given the suitability of the local economic landscape. Malaysian Tax Accountants Association (Mata) deputy president Dr Mohd Fairuz A Razak however said that the government still needed to make several improvements to make it more effective compared to the Goods and Services Tax (GST) that was previously introduced in the country. He said that the improvements should include exempting taxes specifically on all food items, vegetables and fruits comprehensively so that these related items truly meet the targeted needs. 'SST is indeed more people-friendly at this time because its tax rate is not imposed uniformly compared to GST. 'However, essential goods, including imported food products, should not be taxed since they are important elements in the lives of the people, even though some of them may be considered luxury items enjoyed by the affluent. 'My question is, how will the government ensure the separation of luxury items such as vegetables, fruits and livestock products can be enforced comprehensively without burdening distributors and retailers? 'Most importantly, are all food items, vegetables and imported fruits only enjoyed by high-income groups? What about onions, salt, mangoes and bananas that are also daily foods for the B40 group?' he said when contacted by Sinar on Tuesday. Certain fruits considered 'luxury item' like avocados, are now also enjoyed by people from various groups, including those with low incomes. Previously, Prime Minister Datuk Seri Anwar Ibrahim emphasised that the government was not ready to reintroduce GST at the time because the economy of the people has not yet fully recovered. Anwar said that the government chose to continue with the more targeted SST system because it only imposed taxes on certain goods, particularly luxury imported items. Therefore, Fairuz said that all essential goods, including those imported from abroad, should also be exempted from SST tax. 'The country indeed imports a lot of essential food from other countries. So, one way is for the government to exempt food to ensure it is more targeted. 'If not, it will become a major issue and backfire on the government again because essential food is a necessity for living, not merely something fancy enjoyed by certain groups,' he said. Fairuz emphasised that the implementation of targeted SST could only be achieved if the government conducts a thorough review of the list of goods that would be taxed. He said certain fruits considered 'luxury item' like avocados, were now also enjoyed by people from various groups, including those with low incomes (B40). He also advised the government not to rush into expanding SST because many among the people and traders were still confused about the actual number of items subject to tax. Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that the implementation of frequently changing tax policies in the near term would only burden the people and traders. However, he believed that SST could be considered a more suitable tax system to implement in the country's economic landscape if it remained consistent. 'So, the issue is more about the method of implementation and enforcement of the policy more consistently to ensure that the SST system is more effective in its implementation,' he said. He explained that the current implementation of SST showed positive results in line with the government's need to increase national revenue in a targeted manner. 'This means that the existing system must meet the targets or objectives of the government to improve their financial position by reducing the fiscal deficit and making the Federal Government's debt more stable,' he said.
