GST should be imposed at 6%

PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) has suggested that the goods and services tax (GST) should be imposed at 6% which is equivalent to the present government’s sale and service tax.

If the GST is imposed, the government is expected to bring in an annual revenue of RM32 billion.

Senior Executive Director Wan Heng said if it was to be imposed at 4% on the other hand, there would not be any point in imposing the GST because it will be ‘revenue neutral’.

In a media event today at PwC, Wan clarified there is definitely an overwhelming acceptance of GST in the corporate arena, however there still are some concerns.

Wan believes the GST should be announced now and allow businesses a grace period of 18 months to get ready for the new tax system.

He advises the Malaysian government to learn from the near economic shutdown in Greece and Italy where there were changes in government forced by a prolonged budget deficit issue.

Wan says the relative ringgit in the pocket is not growing at the same rate as the prices of goods and services today.

He explains that this is due to direct taxation, which currently stands at close to 60% of the country’s revenue.

Would GST add to inflation?

Many are fearful that the implementation of GST in the country will bring about effects such as those seen in Australia in 2001 where there was a decline in consumer consumption and economic growth for the first time in more than 10 years.

Will GST increase prices?

Most countries that have introduced GST did see a slight increase in prices, but it will return to normal once businesses adjusted their operations and their ability to recover input tax credits under the GST.

Finally, Wan urged the government to provide early clarification for businesses so they could prepare themselves before the implementation.

Source: ASTRO Awani