KUALA LUMPUR (November 1): Malaysian Economic Association (MEA) Post-Budget Dialogue 2022 panelists argued for the reinstatement of the Goods and Services Tax (GST) or the inclusion of a similar tax structure in the current tax system to broaden the government’s tax base to prepare for the turbulent times ahead.
During the session, Manu Bhaskaran, CEO of Centennial Asia Advisors, said there will be a period of “great financial turmoil” for Malaysia and the global economy going forward, as there are bound to be consequences. to the extraordinary quantitative easing, money printing and the low interest rates we have experienced over the past decade.
He added that there will also be greater demand from the government to address the job displacement issues that will affect segments of the workforce and the small business sector, as technology continues to advance and to disrupt the incumbent operators.
“All of these things will cost a lot of money – the government’s fiscal position will be strained and this is where Malaysia’s current concern is whether the country can have the revenue base to fund these. extraordinary claims without tax system like GST.
“I really believe there is a need to broaden the tax base. Virtually every country in the world has a VAT (value added tax) or GST which contributes greatly to their income base, ”he said.
He added that the GST does not have to be a regressive tax as many fear, adding that if the funds raised are intended to help the poor – such as offering assistance to low-income households to offset the impact on them – the net effect would not be regressive.
Malaysian Institute of Economic Research (MIER) President Tan Sri Sulaiman Mahbob, who moderated the discussion, then posed the question to National Budget Office Director Datuk Johan Mahmood Merican, who was among the panelists, to know if the government were to consider implementing the GST.
“If we want to reintroduce it, we have to make it more effective. I think one of the main issues that arose during the last implementation was around refunds.
“There are no immediate plans at this point in the economic recovery to introduce something so broad, but rest assured that my colleagues in the tax department are always ready to introduce it when the time comes,” a- he declared. .
Meanwhile, the president of Tricor Malaysia, Dr Veerinderjeet Singh, said reinstating the GST was not the only solution to the country’s tight budget situation, and suggested the government look at the tax on existing sales and services (SST) and gradually expand it to cover more services over time and then integrate it to have the attributes of GST.
He said it would take some form of harmonization to get this in place, which could take a three-year plan.
“If we could cover all goods and services under the current ESS, I would dare say – assuming there is compliance and proper enforcement – that we will collect the same amount as we collect with the GST,” said Veerinderjeet.
Veerinderjeet pointed out the reality that no one wants more taxes. Thus, according to him, to minimize the grouses, the government will have to have the right timing to implement it.
“This can only be done when the economy is on the path to growth, or maybe even higher minimum wages, so people are more willing to support it,” he said, adding that most countries in the world had turned to consumption taxes and that Malaysia should do the same.
See more 2022 budget highlights here.