GST good for sustainable govt revenue
* This article is originally published on The Malaysian Reserve covering the key takeaways discussed during the 'Webinar 'Patutkah GST Dikembalikan?' co-organised by Bait Al Amanah and Z Consulting Group on 27th June 2022.
This is as GST constituted about 14% and 23% of the govt’s revenue in 2015 and 2017, respectively, while SST instituted only 8%-14%
by ANIS HAZIM / pic by TMR FILE
THE Goods and Services Tax (GST) is necessary to broaden the government revenue sustainably, Institute for Democracy and Economic Affairs (Ideas) director of economics and business unit Dr Juita Mohamad said.
“Looking at the data from 2011 to 2020, about 55% of government revenue comes from direct taxes and on average, it is from petroleum tax revenues where the trend has somewhat decreased from the fall in global oil prices in 2011,” said Juita.
However, she noted that the slight decrease in the oil prices was offset by the implementation of GST from 2015 to 2017.
“It turns out that with the previous GST, it has improved our situation which depends on the income tax of petroleum to a certain extent,” she said.
According to her, GST constituted about 14% of the government’s revenue in 2015 and increased to 23% in 2017, while the Sales and Services Tax (SST) instituted only 8% to 14% of the government’s revenue.
“In the long run, this (GST) is a sustainable and stable source of fiscal revenue for the government, which can later be used to invest such as for the health sector or education,” she added.
The think tank believes that GST could be reintroduced efficiently if there is a recalibration of the current policy and precise plans at the time, especially in the current domestic and global economies fragile.
Recently, Prime Minister Datuk Seri Ismail Sabri Yaakob told Nikkei Asia that the government was keen on reintroducing GST, which was implemented in 2015 but scrapped three years later.
Meanwhile, Umno Supreme Council member Isham Jalil claimed the current SST regime had resulted in loss of revenue of RM100 billion since it was introduced to replace the GST in 2018.
The government is in a tight budget to help the people and provide subsidies amid commodity and food price volatility due to GST cancellation, Isham said.
“What happened was, the rate increase from 6% of GST to 10% of SST. The rate went up roughly twice but the collection was half (from the GST),” Isham said in a Bait Al Amanah and ZCG Consulting webinar today.
He said the government collected between RM40 billion and RM45 billion per year from the GST compared to SST with only RM20 billion per year.
“When we double the rate (tax) and collected only half but the price still rises, it means that more people will run from tax,” he said.
Isham said GST was first introduced in 2015 to solve the issue of taxpayer who runs from paying tax.
Additionally, he also noted that the cancellation of GST which was later replaced with the SST was due to political lobbying.