KUALA LUMPUR: The Goods and Services Tax (GST) is better than the Sales and Services Tax (SST) as GST collection is more than the latter, which benefits the government, businesses and the rakyat as a whole, said economists.
Putra Business School Manager of Entrepreneurship and Community Development and Impact senior lecturer Dr Ahmed Razman Abdul Latiff said for the government, the higher collection of GST than SST resulted in higher revenue because it is comprehensive and more transparent, as well as reduces tax erosion and leakage.
For businesses, GST is an easier process of submission of tax claim and for consumers, the implementation of GST reduced services tax to six per cent from 10 per cent.
Ahmed Razman said the abolishment of GST and reinstatement of SST would affect these three stakeholders in the long run.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the highest SST collection was in 2014, when RM17 billion was collected. However, GST collection was more than RM40 billion in 2016 and 2017.
“So in that sense, GST collection is more effective,” he said.
Afzanizam said while consumer sentiments were impacted by the rise in the cost of living in the beginning, sentiments had improved and household spending growth had normalised.
“Businesses and consumers have become accustomed to GST to a large extent. The important lesson from this is that changes in economic policies, especially ones that involved the man on the street, need to be clearly communicated, such as the impact it may have in the short term and the remedies that the government is planning to take in order to mitigate the impact.
“So, communication is very critical to ensure a total buy in from the various stakeholders.”
Institute of Strategic and International Studies Malaysia director of economics, trade and regional integration Firdaos Rosli said reverting to the SST would result in serious repercussions on public finance, governance, business operations and costs, and prices.
Firdaus said in the short term, Malaysia’s tax base would shrink. The number of taxpayers is only 2.27 million out of the 15 million workforce.
“Assuming a projected year-on-year SST revenue growth of seven per cent per annum, we can expect foregone taxes of at least RM20 billion in this fiscal year.”
He added that the “new” SST rate would have to be set at almost double the “original” rate of 16 per cent in order to match GST revenue collection.