The Malaysian government has no reason to reintroduce the Goods and Services Tax (GST) as frequent changes to the tax system will adversely affect the economy and lower investor confidence, said Prime Minister Mahathir Mohamad on Tuesday (Oct 8).
“Many types of taxes have been introduced, there have been many grumbles by the people about the GST as they have to pay tax twice. That is why we need to reinstitute the SST (Sales and Services Tax),” Dr Mahathir said in parliament.
GST, originally enforced on Apr 1, 2015 at a rate of 6 per cent, was replaced by SST on Sep 1 last year.
Abolishing GST was in the main manifesto of the Pakatan Harapan coalition during the general election last year, with the coalition calling it a regressive tax that “oppressed lower income groups”.
“The SST (implementation) is proceeding, we only need to improve it, and there is no need to revert to a tax regime that was rejected by the people,” Dr Mahathir said on Tuesday.
He was replying to Member of Parliament for Kalabakan Ma’mun Sulaiman, who wanted to know if the government is ready to reintroduce the GST if that is what the people want.
Ma’mun said there are different opinions among the public, with some agreeing to the proposal and a substantial number rejecting it.
Dr Mahathir had said last week that the government will look at the need to reintroduce the GST if that is what people want. His comments came after the Malaysian Institute of Economic Research urged the government to reinstate GST in the next year’s budget at a lower rate of 3 per cent.
However, Dr Mahathir clarified on Tuesday that GST cannot be reintroduced as its implementation had burdened the public and taxpayers, especially with the delays in getting refunds of input tax credit, which was a cost to businesses.
In response to a supplementary question from Kangar MP Noor Amin Ahmad on the ability of the SST system to control payment defaults by businesses compared to the GST regime, Dr Mahathir expressed confidence that the problem would not arise in the SST implementation.
“Actually there is no tax evasion as the SST has been around for some time and faces no problem, that is why we rejected the GST and reintroduced the SST.
“(I am confident) if managed well, (the SST) can be better than the GST,” he said.
When asked whether the government’s economic policies and cost-cutting measures could cover the SST shortfall of more than RM20 billion (US$4.7 billion) compared to the tax revenue during the implementation of the GST, Dr Mahathir said the shortfall was not due to the weakness of the SST system.
He explained that when a tax system is introduced, there would at first be a reduction due to the changes made by officers and taxpayers.
“But I am confident that in the coming years, the SST (tax collection) will exceed the GST collection,” he said.