Malaysia: Frequent changes to tax system will harm economy
KUALA LUMPUR: There is no reason for the government to reintroduce the Goods and Services Tax (GST) as frequent changes to the tax system will adversely affect the economy, lower investor confidence and bring a bad image to the country, says Tun Dr Mahathir Mohamad.
“Many types of taxes have been introduced, there have been much grumble by the people about the GST as they have to pay tax twice, that is why we needed to reinstitute the SST (Sales and Services Tax).
“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,” the Prime Minister said during the Minister’s Question Time session at the Dewan Rakyat here today.
He was replying to Ma’mun Sulaiman (PH-Kalabakan) who wanted to know whether the government was ready to reintroduce the GST if that is what the people want.
Ma’mun said there are differing opinions among the people, with some agreeing to the proposal and a substantial number rejecting it.
Dr Mahathir clarified that the GST regime cannot be reintroduced as its implementation had burdened the public and taxpayers especially with the delays in getting refunds of input tax credit, which is a cost to businesses.
In reply to a supplementary question from Noor Amin Ahmad (PH-Kangar) on the ability of the SST system to control payment defaults by businesses as with the GST regime, Dr Mahathir expressed confidence the problem does 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.
To a question from Datuk Seri Dr Ismail Mohamed Said (BN-Kuala Kurau) on whether the government’s economic policies and cost-cutting measures could cover the SST shortfall of over RM20 billion compared to the tax revenue during the implementation of the GST, Dr Mahathir said the shortfall is 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.
On the proposal to reimplement the GST, Dr Mahathir said it would require further study, especially regarding the impact on consumers of higher prices, the inflation rate, and higher compliance cost to businesses due to the need to change the computerised system and retrain staff, besides tax refunds. – Bernama