Treasury: Govt not raising GST rate

Treasury secretary-general Tan Sri Dr Mohd Irwan Serigar Abdullah today said the government has no plans to increase the Goods and Service Tax (GST) as it has just been implemented this year.

He said the 6% consumption tax was implemented at the right time and has proven to be the saviour of the nation’s economy as its revenue would be given back to the rakyat.

He said the GST revenue could cover the shortfall in the government’s income as a result of the drop in world crude oil prices.

“When the GST was introduced, the oil-related revenue dividend was RM62 billion last year, dropping to RM44 billion this year after the government announced readjustment measures.

“So, this is almost a RM18 billion drop in oil-related revenue. Luckily, we introduced the GST, and we are estimating to collect GST revenue of RM27 billion nett as of December this year.”

Mohd Irwan noted the actual collection would be about RM32 billion but the government would refund about RM5.4 billion to companies for their input taxes and also refund tourists.

He also said Malaysia can achieve the projected gross domestic product (GDP) growth of 4-6% next year if crude oil prices stay above US$40 per barrel.

He said the GDP growth target for next year was based on oil prices at US$48 per barrel and slower global growth, driven by private investment and consumption growth of 6.7% and 6.4% respectively.

However, he added, these are subject to changes such as capital flows and tougher financial situation in the wake of the US Federal Reserve’s announcement on an interest rate hike.

At a post-Budget 2016 press conference at his ministry here, Mohd Irwan said the government has a contigency plan and would only adjust the spending if the oil price dips below US$40 per barrel.

“So far, the oil price is hovering at around US$45 per barrel, or US$46 or even US$50, but as long as it does not touch US$40, we are okay.”

Last Friday, Prime Minister Datuk Seri Najib Razak tabled the 2016 Budget themed ‘Prospering the Rakyat’.

When the 2015 Budget was tabled in October last year, Mohd Irwan said, the oil price was US$100 per barrel, but dropped to about US$55 per barrel in early January this year.

He said besides the crude oil price, Malaysia also faces economic challenges due to the moderation in China’s economic growth to a projected 6.3% next year.

“Our exports to China are quite large and we will be affected. That is why this 2016 Budget is built on various taxes to boost domestic demand.”

Mohd Irwan said the government has provided a lot of incentives and high impact projects for the Malaysian Investment Development Authority to take care of investments to further boost the economy.

He noted that projects such as Cyberjaya City Centre, Sime Darby Vision Valley and KLIA Aeropolis would spur and sustain private investment activities.

“With the tax incentives, we expect the middle-income group to have high disposable incomes to spend their money. Indirectly, this will spur consumption and investment will take care of the domestic economy to achieve 4% growth.

“With the additional exports and others, we can project 4.7% growth. Even the world economy is having a problem, (but) we have injected RM5.9 billion into our system for the 1Malaysia People’s Aid (BR1M) scheme.”