World Bank economist: RM19b tax revenue lost by not having GST

 

Malaysia could have made RM19 billion more in tax revenue last year if it had implemented the Goods and Services Tax (GST), instead of the existing Sales and Services Tax (SST).

This is if comparisons are made not on nominal terms, but by percentage of tax revenue to the gross domestic product (GDP), said World Bank lead economist for Malaysia Apruva Sanghi.

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 is RM50 billion.

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

"That would have been 61 percent more raised via GST than SST!" he said on social media platform X, formerly known as Twitter.

Small point on GST vs SST:

GST raised in 2017=MYR 44b

SST raised in 2022=31b

Rev Gap=13b & *negative* once you take into account 19b GST refund

Correct but misleading!

This is ‘cos M’sia nominal GDP was ~30% > in 2022 vs 2017

So we should look at % of GDP raised & not RM…

— Apurva Sanghi (@ApurvaSanghi) October 4, 2023

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

Apurva (above) said this may seem that the revenue gap is smaller, especially when taking into account the RM19 billion spent on GST refunds.

"(This is) correct but misleading! It’s because Malaysia's nominal GDP was about 30 percent more in 2022 compared to 2017," he said.

No plans for GST

Last month, Economy Minister Rafizi Ramli said the government is open to exploring any avenues to widen its tax base, including reintroducing the GST.

However, he noted there are no plans for the GST at the moment and the government will focus on developing and rolling out the capital gains tax in 2024.

In March, Deputy Finance Minister Ahmad Maslan told Parliament the net revenue for GST was RM27.3 billion in 2015, when it was introduced to replace SST.

However, in 2019, the government gained RM27 billion from SST, which was reintroduced by the Pakatan Harapan government in 2018.

Opponents of the GST argue it was a regressive tax which unfairly penalises the lower income group, who are currently 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 argue that the GST can efficiently capture tax revenue and stop leakages, compared to the opaque SST. - Mkini