Consider OECD suggestion to bring back GST - Mustapa

 

The Organisation for Economic Co-operation and Development (OECD) has recommended that Malaysia bring back the goods and services tax (GST) as part of its medium-term fiscal strategy.

Minister in the Prime Minister’s Department (Economy) Mustapa Mohamed said this is something policy-makers should consider when the time is right.

He said the OECD 2021 Economic Survey of Malaysia has made a number of recommendations to stimulate economic revival and put the country’s economy back on a firm footing post-pandemic.

“Among them is to prepare a post-Covid-19 medium-term fiscal strategy to reduce public debt and contingent liabilities. Our fiscal situation has indeed been strained since last year by the economic contraction, a steep decline in revenues, and increased expenditure for healthcare and income support programmes,” he said at the launch of the 2021 OECD Economic Survey of Malaysia.

Mustapa said the government will always put the rakyat first, especially during times of need, but when this crisis settles down and things normalise, Malaysia must begin to gradually set the economy back on a sustainable fiscal footing.

The OECD has also recommended that the country expands the coverage of employment injury insurance for the self-employed to more sectors.

“They have also recommended that we include workers in unregulated markets, such as gig platform workers, in the pension scheme under the Employees Provident Fund (EPF).

“These recommendations in the social protection space suggest that Malaysia must adapt to the changing socio-economic landscape, and must implement quality regulation in unregulated markets in order to protect Malaysian workers,” he added.

In addition, the OECD also suggested that Malaysia introduce a carbon tax and gradually increase its rate over time, while at the same time mitigate the tax’s impact on vulnerable households.

“Malaysia will deliberate on some of the OECD’s recommendations, and where suitable, will incorporate them into our medium- and long-term economic policies.

“As Malaysia positions itself for the next phase of its development, the OECD 2021 Economic Survey of Malaysia has also suggested steps that Malaysia needs to take in order to transition successfully to a high-income country and to sustain equitable growth beyond the Covid-19 pandemic.

“This is in line with our country’s aspirations to achieve a decent standard of living for all Malaysians,” Mustapa said.

Later during a press conference, Mustapa said the government has begun efforts on tax reform.

He said there have already been some ideas on the table related to corporate tax, GST, and tax collection measures.

“As mentioned by Alvaro Pereira (the OECD's director of economic country studies), the timing (to introduce tax reforms) is not appropriate now certainly under the present crisis situation.

“It's not a good time to have tax reforms but I want to share that the government has started work on looking at some reforms in the tax system.

“In the OECD data, the tax to gross domestic product (GDP) ratio is quite low in Malaysia compared to other countries and we have to diversify,” he said.

Mustapa said taxation is important to finance developments in the country and to promote efficiency and competition.

- Bernama