Johari wades in on GST-SST debate

Former second finance minister says the SST will give irresponsible traders a chance to evade tax.

The 6% goods and services tax was zero-rated in June, with the sales and services tax to take effect in Sept (Bernama pic)

PETALING JAYA: Former second finance minister Johari Abdul Ghani today sought to clear the air over misconceptions about the goods and services tax (GST) amid an ongoing debate on how it measures up against the sales and services tax (SST).

Johari Abdul Ghani

In a statement, he said the GST should not result in an increase in prices compared to the SST if traders did not take advantage of the situation to raise their prices.

He said this was because traders could claim tax credit from the customs department for the GST they had paid.

He added that there were other factors at play in the increase of prices which were not related to the GST.

These included supply and demand, whether raw materials were locally sourced or imported, exchange rates, profit margins and the quality of goods and services offered to consumers.

“In debating about the GST, many are not focusing on the benefits of the GST system which can curb and reduce the shadow economy,” he said.

The shadow economy is often used to refer to business transactions for goods and services produced alongside those in the formal economy that are paid for in cash and not declared for tax.

Money in the shadow economy includes illicit funds from corruption, illegal gambling, drugs and smuggling, among others.

Johari, who is the Federal Territories Umno chief, said the GST was transparent and efficient, whereas the SST would give irresponsible traders a chance to evade tax and make it difficult for the government to monitor them.

He added that the efficiency of the GST allowed the government to increase its revenue from taxes of the shadow economy, which could be spent for the benefit of the people.

“More than 170 countries have implemented the GST and not one of them has gone back on this system except Malaysia,” he said, adding that the GST was recognised by bodies such as the International Monetary Fund and the World Bank.

The government is set to re-introduce the SST on Sept 1 at rates of 5% and 10% for selected goods and 6% for services, replacing the 6% GST which was introduced on April 1, 2015. - FMT