GST not suitable for current economy, says economist

 

On April 1, 2015, a 6% goods and services tax was implemented by the Barisan Nasional government. It was repealed three years later, after Pakatan Harapan came into power.

PETALING JAYA: 

An economist has praised Prime Minister Anwar Ibrahim’s restraint amid calls for the goods and services tax (GST) to be reintroduced, saying it is not suitable in the current economic climate.

Geoffrey Williams says the GST is a regressive tax system because it overburdens low-income households which tend to spend a large proportion of their earnings on taxed goods and services.

Geoffrey Williams.

If the GST is reintroduced, the people will have to bear a RM700 increase in taxes per person, proving that the tax does not benefit ordinary citizens,

 he said, pointing out that it will cost them 56% more than the current sales and services tax (SST).

Reimplementing GST will also disrupt businesses severely and give rise to additional costs that will be shifted to consumers in the end,

 he told FMT.

On Sunday, Anwar acknowledged that the GST was the most efficient and effective taxation system, but said his government’s priority is to raise personal income levels before making changes to its taxation policy.

Give us time to boost the economy and the income threshold to a minimum of RM3,000 or RM4,000,

 he said.

On April 1, 2015, Najib Razak’s Barisan Nasional government introduced GST at the rate of 6%.

However, on Aug 8, 2018, following Pakatan Harapan’s victory at the 14th general election, the Dewan Rakyat repealed the GST Act 2014 and passed the SST Act 2018 in its place.

Williams said businesses tend to prefer the GST regime as it allows them to claim a credit for purchases and expenses, which is offset against tax collected from sales. This mechanism ensures that the tax is ultimately borne by end-consumers, not the businesses.

Abu Sofian Yaacob.

However, he said delays in refunds to businesses had in the past disrupted the cash flow of many small and medium-sized enterprises.

Meanwhile, Universiti Malaysia Kelantan’s Abu Sofian Yaacob suggested that any reintroduction of the GST regime should be at no more than 3%. He said the rate can be raised gradually over three to five years.

This will not burden businesses. Don’t repeat the old mistake of setting the rate at 6%,

 he said. - FMT