KUALA LUMPUR – It is the norm for any nation to want to increase its revenue to enable its citizens to enjoy excellent facilities and services.
As infrastructure development involves high expenditure, governments have to impose consumption taxes like the Goods and Services Tax (GST) to finance the building of new roads, hospitals, highways and other amenities, as well as maintain its existing assets.
Universiti Utara Malaysia’s School of Economics, Finance and Banking senior lecturer Muhammad Ridhuan Bos Abdullah said the introduction of GST in Malaysia three years ago was an appropriate move by the government as the people were now benefiting from its returns through various channels, one of which was the 1Malaysia People’s Aid scheme (BR1M).
“Besides BR1M, Malaysians are also enjoying better public transport and other initiatives mobilised through the efforts of various government agencies,” he told Bernama, recently.
Any form of taxation will surely have an effect on the people but the gains from that tax will go back to the people, he pointed out.
“This is why we must understand (why GST was introduced in Malaysia) and be rational about it,” he added.
Malaysia’s six per cent GST was introduced on April 1, 2015 to replace the Sales Tax and Service Tax (SST).
The GST is a more comprehensive, effective and transparent tax system and was designed to overcome the various weaknesses found in the SST, such as leakages and overlapping taxes.
According to the Royal Malaysian Customs Department website, a total of 160 countries have imposed GST or Value Added Tax to improve their taxation systems. These countries include seven ASEAN member states, 19 countries in Asia, 53 in Europe, 44 in Africa, 11 in South America and 19 in the Caribbean and Central and North America.
Malaysia’s six per cent GST is among the lowest in the world and the government has exempted the tax from 578 essential goods to protect the interests of the lower-income group.
FOR THE PEOPLE
In 2017, the government collected RM44 billion in GST while the previous year’s collection was RM41 billion.
The government expects its GST collection to touch RM45 billion this year although a sum of RM43.8 billion was projected in the 2018 Budget.
Muhammad Ridhuan Bos said countries like the United States and Australia, whose consumption tax systems were used as references when drawing up Malaysia’s GST model, also offered social aid similar to BR1M.
Other initiatives implemented by the government to reduce the burden of the people include 1Malaysia People’s Shop, 1Malaysia Training Scheme, 1Malaysia People’s AgroBazaar Project and 1Malaysia Clinic, as well as various affordable housing projects and debit cards for undergraduates.
“It cannot be denied that these initiatives have benefited the people a lot. In fact, these initiatives can be improved upon to serve the people better,” added the academic.
MIDDLEMAN CAUSING PRICE HIKES
Federation of Malaysian Consumers Associations (Fomca) deputy president Mohd Yusof Abdul Rahman said the GST collection has enabled the government to cope with the reduction in revenue brought about by the lower prices of commodities such as petroleum, which used to be the biggest contributor to the nation’s income.
The fluctuating prices of commodities, including the crisis caused by the sharp drop in the global oil price, have made the GST more relevant as it ensured a stable source of revenue which the government can use for development purposes.
“Since GST is a consumption tax, the more we buy the more GST we have to pay. However, the government has exempted GST or zero-rated many types of essential goods.
“Consumers must understand that proceeds from GST are used for the development of the country,” said Mohd Yusof.
Urging the government to step up enforcement to check non-GST related price hikes, he said it was the middleman who was taking advantage of the situation by raising prices indiscriminately.
Unlike SST which saw many traders escaping from paying the tax, all businesses eligible for GST have to pay up as they must register with the Customs Department.
“When SST was imposed, the government lost a lot of revenue as many traders didn’t pay the tax. Since GST is more comprehensive, the government will be able to collect the tax more efficiently, thus benefiting the people and the nation,” said Mohd Yusof. – BERNAMA