The sudden outbreak of COVID-19 has had an impact on the economy of all countries, including Malaysia. The epidemic prevention and assistance policies in the past three years have caused people to believe that Malaysia's Treasury has been “devastated”. Amid this situation, there are many voices saying that the government intends to restart the consumption tax (GST).
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In an interview with Nikkei Asia, Prime Minister Ismail Sabri Yaakob acknowledged the government's intention to restart the GST to boost government revenues and relieve pressure on public subsidies.
The GST system was implemented by former Prime Minister Najib Razak and sparked many discussions. It was finally eliminated by the Greek Coalition government after only three years of implementation in Malaysia (from 2015 to 2018).
Ismail Sabri Yaakob (right) said the government intends to revive the GST tax under former Prime Minister Najib Razak (left).
Mr. Ismail Sabri said the government was aware of the negative perception of GST, but there were few options for raising or expanding government revenue. Therefore, he said, the government will find ways to educate the public to accept the implementation of GST and transparent tax system.
The prime Minister added that the government lost RM20 billion in annual revenue when GST was abolished and replaced by sales and Services Tax (SST).
“No country in the world, except Malaysia, has recovered from GST to SST.”
Bank Negara Malaysia supports the resumption of GST
Because it would greatly reduce the financial burden on the government.
On the other hand, Ismail Sabri Yaakob said the government was currently working on a plan to rationalize targeted subsidies to benefit the low and middle income groups and this plan would be presented to the Cabinet in due course.
Back in March, the Treasury stated in a written answer to Parliament that the government was also examining the appropriateness of reintroducing the GST and other consumption tax regimes, including the weaknesses of the existing sales and services taxes, as well as the weaknesses of implementing the GST in 2015. The Ministry of Finance also explained that if the new tax system is to be repeated, it must be manageable, not burdensome to merchants, while strengthening the country's finances.
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