PUTRAJAYA: Replacing the Goods and Services Tax (GST) with a Sales and Services Tax (SST) would be a step backwards and could lead to higher corporate and income tax instead, said Prime Minister Datuk Seri Najib Razak.
“GST is a more equitable and progressive tax. The more you consume, the more you pay. Because of the GST, we have been able to reduce corporate tax and personal income tax,” said Najib, who is also Finance Minister.
Malaysia collected RM41 billion from GST last year.
Najib, speaking at a briefing for editors today, was asked about Pakatan Harapan chairman Tun Dr Mahathir Mohamad’s proposal to abolish the GST and bring back the SST.
Najib said many people forget that they have already benefited from the more transparent GST through substantial reduction in corporate and income taxes.
“If we go back to SST at the existing rate, you only collect RM20 billion. There is a gap of another RM20 billion, so how do you sustain a loss of RM20 billion? That is not being said. Chances are, if we go back to SST, your personal income tax has to go back up. Are you willing to do it?”
Najib said GST has also helped reduce the black economy and made it more difficult for those seeking to avoid paying taxes. In addition, the increased tax collection benefits the rakyat through provision of various services at affordable rates.
“With a lot of things we do, there are indirect subsidies that people don’t realise. Electricity tariff in this country is one of the lowest in the world because of the huge amount of gas subsidy. We don’t allow gas prices to rise according to market price. It increases little by little, well below market price.”
Najib said Malaysia has also been praised by international rating agencies for introducing the GST and for the rationalisation of its subsidies.
“Imagine if our rating is reviewed downward, the cost of borrowing goes up. This will be reflected in your car loans, housing loans... everything will go up. Once a country goes down that slippery slope, the impact will be very negative and will be felt by the rakyat.
“So, don’t think that these ratings do not concern the rakyat. It does affect the rakyat. That’s why we are very concerned,” he added.