PUTRAJAYA: Malaysia’s headline inflation is expected to ease to two per cent this year despite the reintroduction of the Sales and Services Tax (SST) on September 1
Last year, the country’s headline inflation was 3.7 per cent.
“For us if we can keep it around 2.0 per cent, I think that will be good enough. It may go down lower,” Finance Minister Lim Guan Eng said at a media briefing here today.
“However, it all depends on how the impact of SST is absorbed by the economy and whether there is any illegal profiteering,” Lim added.
He said price impact under SST would generally be halved of that under GST, given that the former’s taxable items coverage was lesser than GST’s.
GST, which was introduced by the previous government in 2015, had 11,197 taxable items, while the impending SST would have 6,405 taxable items.
Lim said the potential price increases should be under controlled, adding that the government had carefully formulated the exempted items in order to minimise the rakyat’s burden.
The rakyat, he explained, would be less burdened by the consumption tax as SST only covered about 38 per cent of the consumer price index (CPI) basket compared to GST’s 60 per cent.
SST has for now exempted 5,443 items, or about 10 times more than GST’s 545 exempted items.
He urged the Customs Department to be more friendly to make it easier for the rakyat to pay the tax.
“The government provides service with a smile - SST. Let's us cooperate together. This is a friendly approach to make this taxation easy for both the government and business players. This is effective to build confidence between customs and the rakyat,” he added.
Lim said so far, nearly 80,000 businesses had registered for the SST.
The government, he said, had made its final decision to exempt sales tax on restaurant operators with an annual turnover of less than RM1.5 million from RM1.0 million previously.
“With the re-introduction of SST, the government will collect RM21 billion per annum compared to RM44 billion from the GST annually.
“The rakyat will benefit RM23 billion in terms of tax savings with the implementation of SST,” he added.
During tax three-month tax holidays, Malaysia incurred losses of over RM10 billion after zero rating the GST in June this year, according to reports.
Lim said the government was still reviewing the taxable items and tax rate, as discussion was on going and subject to changes.
“We will keep reviewing the rate and items, if these affect the economic well-being of the rakyat,” he said.
Lim said the government is expected to start paying the GST refund to affected business operators by next year.
“We will find ways to source the payment,” he said adding that the government was undertaking various measures to monetise its assets and reduce expenditures.
Lim acknowledged the shortfall of RM23 billion but said the government expects to offset the deficit by collecting more income from Petronas, Bank Negara Malaysia and Khazanah Nasional Bhd as well as reducing operational costs.
The government, he added, was expected to rake in RM4 billion of SST collection towards the year-end, and targeted the full collection in 2019 at RM21 billion.