Public to welcome decision maintain GST at 6%

 |Oct 23, 2016
Malaysian GST rate at 6% the lowest among ASEAN countries.
Malaysian GST rate at 6% the lowest among ASEAN countries.

The government’s decision to maintain the goods and services tax (GST) at six per cent is one that would be welcomed by the public, as many of whom are feeling the pinch of the current economic climate, says a tax expert.

GST Partner from Deloitte Malaysia, Senthuran Elalingam, told Bernama that however, from a tax reform perspective, more could have been done, as currently Malaysia’s corporate income rates were the highest in the region and only 6.7 per cent of the total population paid personal income tax.

He said although the government has announced some short-term relief to boost investment, create employment and retain talents, it should in future look at the longer-term reduction of corporate and personal income tax rates.

“Our GST rate, although the lowest in ASEAN and one of the lowest in the world, also has the largest list of exemptions in the world which makes it very complicated for both businesses and regulators.

“A reduction in the number of exemptions would be a way to compensate for any losses from long-term reductions in the income tax rates without having to increase the rate of GST.

“Ultimately, we should look at ensuring that capital does not flow out from Malaysia to our neighbours and that we continue to retain the best talents,” said Senthuran.

On the GST collection of RM30 billion as of Oct 19, 2016 announced by Prime Minister Najib Tun Razak during 2017 Budget on Friday, Senthuran said, the number could exceed the expectation of RM38.5 billion this year.

This, he said, would depend on the improvements in the economic conditions and enforcement activities by the Royal Malaysian Customs Department.

However, Senthuran said, greater tax reform was needed to address the losses in oil and gas sector’s revenue and depreciating ringgit.