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Malaysia - GST a useful tool to reduce
Malaysia’s budget deficit
Putting the Goods and
Services Tax (GST) on a pedestal after the unveiling of
Budget 2011 was necessary as it could be the platform
for the country to leap to a higher level of development
and income through the build-up of budget surpluses.
This topic was the highlight of the 2011 Budget Seminar
organised by Ernst & Young Tax Consultants Sdn Bhd
(Ernst & Young) held at a leading hotel here yesterday.
“The announcement made before Budget Day (October 15) on
the postponement of the implementation of GST tells us
that GST is on,” said Ernst & Young partner Azhar Lee.
“The only guessing game now is the time frame for
implementation.”
He continued to highlight that with Malaysia’s budget
being in a deficit successively for almost fourteen
years, GST could be an effective tool to reduce the
country’s deficit.
“By comparison, countries that have value-added tax
(VAT) or GST in place appear to be able to manoeuvre
their budgets more successfully. We seem to be in a sea
of countries where GST is implemented – look at the
Philippines and Vietnam.
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“Malaysia’s estimated budget deficit budget for 2011 at
5.4 per cent is unattractive. It shows a lack of
confidence in the market.
“We are living in a subsidy economy and more effort
should be put into making our economy more transparent
with focus on market play rather than be dependent on
subsidies,” he noted..
Azhar pointed out that the country needed to be more
independent in terms of dependency on the global
economy, giving prime examples such as China and India
that faced relatively cushioned effects when the global
economic crisis hit a few years back.
“On the other hand, Malaysia and Singapore are very much
affected when setbacks occur in major countries such as
the Unites States and Europe. From this, we can see how
tied we are to the global economy.”
Customs deputy director and GST Review Panel, Wan Leng
Whatt affirmed this view, adding that Malaysians need a
better understanding of the GST across industries before
the tax could be implemented.
“The reason why the GST implementation was postponed was
most probably due to the fact that we feel more
preparation and understanding need to be done for
businesses and the public in general to understand the
implications,” Wan said.
The need to widen the country’s tax base was made
obvious by the proposal to increase service tax from
five to six per cent, said Ernst & Young director Koh
Siok Kiat.
“Although this is a clever move so as not to unduly
burden the people at this juncture, perhaps GST should
be considered in the long run,” he said.
“With the existing services tax in effect in the
country, we can see that there are many weak spots and a
lot of issues to deal with. GST is more efficient in
this context. However, to replace one with the other
requires more understanding by corporations and the
public.”
Ernst & Young partner, Julie Thong, focusing on the
effects of Budget 2011 on corporate tax, said, “Despite
no major changes which affect companies being introduced
in this budget, taxpayers should nevertheless take note
of various extensions to existing incentives for some
activities.”
This, she pointed out, included renewable energy
activities, reduction of greenhouse emissions and
approved food production projects.
“In addition, businesses should take note of some subtle
changes made in respect of reinvestment allowances as
well as the penalty on withholding tax.”
Ernst & Young director Ng Siaw Wei covered the topicsof
personal tax while Koh divulged more on the intricacies
of indirect tax in the seminar.
Source:
The Borneo Post, Malaysia, dated 27/10/2010
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