Now right place and time for GST, Najib says

KUALA LUMPUR, Jan 22 ― April 1 is the ideal time to implement the Goods and Services Tax (GST) as inflation is currently low and the government needed extra revenue amid plunging OIL PRICES, Prime Minister Datuk Seri Najib Razak said yesterday.

Najib also told a televised interview that consumers should now have higher disposable incomes with the fall in retail fuel prices made possible by the managed float system now used for RON95 petrol and diesel pricing.

“In my understanding, this proves that the decision to implement the GST is at the right place and the right time,” Najib was quoted saying in the interview published by local daily New Straits Times today.

“Currently, only one in 12 people pay income tax, so tax-based revenue is limited, which affects the nation’s income. If the nation’s income is affected, we may face a situation where the deficit will increase and we will have to increase borrowing to cover expenses and such. However, if the nation’s income increases, our economy will strengthen and when it does, we are better prepared to pull through any unexpected circumstances,” he added.

DAP secretary-general Lim Guan Eng has urged Najib to defer the implementation of the GST, a broad-based consumption tax set at 6 per cent in Malaysia, following a massive flooding disaster in the east coast of peninsular Malaysia last month that forced hundreds of thousands to evacuate their homes.

Lim, who is also Penang chief minister, claimed that the GST was a regressive tax that would burden the low and middle income earners while forcing the poor to drop below the poverty line.

However, the World Bank’s Dr Frederico Gil Sander, a senior economist on Malaysia, has suggested that Putrajaya reduce the number of goods that are exempted and zero-rated from the GST to help offset the slide in oil income.

PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) executive director Raja Kumaran was quoted in English daily The Star in October 2014 saying that Malaysia’s zero-rated and exempted lists appear to be the longest in the region. There are over 900 items that are listed as zero-rated or exempted from the consumption tax system.

Earlier this month, Dr Veerinderjeet Singh, chairman of tax advisory firm Taxand Malaysia, also warned of confusion arising from the long list and said the complex GST system could pose administration and accounting challenges to businesses.