Higher GST, lower income tax rates likely

With falling crude oil prices and the resulting lower revenue to the government, the goods and services tax may see an increase in the near future, say economists. – The Malaysian Insider file pic, October 31, 2015.Malaysia may lower income tax rates gradually in the near future while raising the goods and services tax (GST) as the nation contends with less crude oil income.

Edge Weekly, quoting economists and tax consultants, reported in its latest issue, dated November 2, that the government needed to increase tax revenue to reduce budget deficit.

Edge Weekly quoted Taxand Malaysia Sdn Bhd chairman Veerinderjeet Singh as saying he had anticipated the maximum personal income tax and corporate tax rate to be 20% in 2020 while the GST was expected to rise to 10%.

“However, with the sudden increase in the top marginal personal income tax rate to 28%, it is now unclear and uncertain as to what the tax policy direction is for

the future,” Veerinderjeet said.

The country implemented the GST effective from April 1 this year at 6%. Veerinderjeet's comments followed Malaysia's Budget 2016 announcement.

Economists said Budget 2016, which was unveiled on October 23, would test policy makers' commitment to fiscal discipline amid the pressing need to spend to deliver economic results.

The challenge comes at a time when crude oil prices have fallen to about US$46 (RM198) a barrel now from US$81 a year earlier. Crude oil is a major income source for the the government and crucial component of the Malaysian economy.

Bank Negara Malaysia will announce the country's third quarter economic numbers on November 13.

Read more in the latest issue of Edge Weekly, including a comparison of the income tax between Malaysia and its neighbours, Singapore and Thailand. – The Edge Markets