The government looks set to introduce the Sales and Service Tax this year.

In the past couple of years, I have highlighted in the media the importance of implementing Goods and Services Tax (GST).

Even a conservative country like India implemented GST last year in order to move forward as a progressive nation.

Can Malaysia afford to abolish GST and progress in the right direction at the same time? Bear in mind that our national debt has reached a critical level.

The abolishment of GST will result in a shortfall of RM20 billion. In the short term, there shouldn’t be much of a problem to fill up the shortfall, as prices of crude oil are on the rise, hitting US$80 per barrel for the first time since 2014. As Malaysia is a net exporter of crude oil, we can count on this windfall to cover part or the entire shortfall. But, for how long? Crude oil prices could crash abruptly.

We should not forget that our vision is to turn our country into a developed nation by 2020. By doing so, we need to upgrade our human capital and infrastructure to advance our industries to generate positive outcomes and add sufficient value to our economy. These activities require huge capital outlay. Can our government rely on Sales and Services Tax (SST) to achieve this vision?

If the abolishment of GST were to be carried out on Aug 1, perhaps the government would have more time to think of a better way to honour its pledge, and, at the same time, implement a more effective tax regime to manage the economy. It could replace GST with Value-Added Tax at a lower rate, say four per cent instead of six per cent. By doing so, it could collect about RM30 billion instead of RM20 billion via SST collection.

Patrick Teh,

Ipoh, Perak