MCA calls for lower GST rates to replace SST hike

BUDGET 2024 | MCA has called on the government to reintroduce the goods and services tax (GST) instead of increasing the sales and service tax (SST).

Party spokesperson Saw Yee Fung urged the government to implement the GST at a lower rate of three to four percent as an alternative.

This is as the hike from six percent to eight percent in SST would highly impact the M40 income group, she said.

“The government should reorganise the national taxation system, and not raise the tax rate to stabilise the economy, not to mention at a time when the value of our ringgit is decreasing and the inflation rate is also increasing.

“The government's decision to raise the SST rate is also seen as ‘punishing’ those who regularly pay taxes. In addition, SST is also not as efficient as GST in dealing with the problem of leakage and evasion of tax payments by irresponsible quarters.

“Therefore, the government's decision to raise the SST rate only encourages the people to find ways to avoid paying taxes, and ultimately affects the government's income,” she said in a statement today.

MCA’s Saw Yee Fung

Saw added that the government’s plan to use e-invoicing as a method to solve leakages and tax payment exemptions will take a long time to be fully implemented.

“If the government is really aware and concerned about the hardships of the people, and sincerely wants to help reduce their burden, why are they refusing to implement GST at a lower rate, such as three to four percent, but are willing to raise the SST rate to eight percent?” she questioned.

During the tabling of Budget 2024, Prime Minister Anwar Ibrahim said the SST increase does not include services such as food and beverages, and telecommunications.

The affected industries include logistics, brokerage, underwriting and karaoke.

Muar MP Syed Saddiq Abdul Rahman questioned if the proposed increase in SST was a "disguise" for GST.

SST vs GST revenue

Prior to the tabling of the budget, World Bank lead economist for Malaysia Apruva Sanghi said that Malaysia could have made RM19 billion more in tax revenue last year if it had implemented GST instead of SST.

This is if comparisons are made not on nominal terms, but by percentage of tax revenue to the gross domestic product (GDP), he added.

In 2017, he said, the GST raised RM44 billion, making up about 2.8 percent of the GDP that year.

In 2022, the equivalent amount for 2.8 percent of the GDP was RM50 billion.

However, in 2022, the SST contributed only RM31 billion in tax revenue, an RM19 billion shortfall.

This contradicted the arguments that SST revenue was comparable to that of the GST because RM31 billion was raised via SST in 2022 while the GST raised RM44 billion in 2017.

Khazanah Research Institute (KRI) chairperson Nor Mohamed Yakcop however opined that the increase in SST will strengthen the country’s fiscal position while minimising the impact on households.

Opponents of the GST argue it was a regressive tax which unfairly penalised the lower income group, who are not paying income tax.

However, proponents of the GST believe this can be mitigated by introducing the GST at a low rate and ensuring essential goods and services are zero-rated.

They also argued that the GST can efficiently capture tax revenue and stop leakages, compared to the opaque SST. - Mkini