by NUR HANANI AZMAN/ pic by TMR GRAPHIC
Reintroducing the Goods and Services Tax (GST) would remove all current challenges faced with the Sales and Service Tax (SST) and give the government a lot more scope to widen the tax base, said Deloitte Malaysia indirect tax ED Senthuran Elalingam.
He stressed that the timing of the reintroduction of the GST is critical, as it is important that businesses are given time to stabilise post-pandemic before needing to implement new tax systems.
“In the medium to longer term, replacing the SST with the GST from a tax policy perspective makes sense. There are significant challenges to widening a single stage tax like the SST.
“Recent attempts to widen the scope have resulted in a lot of unintended consequences such as multiple levels of tax being paid and confusion on scope,” he said in a statement on Friday.
Senthuran believed any decision to widen the SST would need very careful considerations.
The Organisation for Economic Co-operation and Development (OECD) on August 12 suggested the government reintroduce the GST in the medium term considering the efficiency of tax collection and the need to raise revenue.
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed said policymakers should consider reintroducing GST when the time is right.
“Malaysia is not ready for tax reform now as it is still facing unprecedented challenges from Covid-19 pandemic.
“However, the government has begun looking at reform in some tax systems, such as tax to GDP ratio which is quite low in Malaysia compared to other countries,” said Mustapa.
Senthuran said governments across the world have expended significant capital in the fight against Covid-19 and will have little choice but to expand their tax base.
He opined that Malaysia, which had a fairly narrow base to start with, will need to look at the overall structure of its tax system in the longer term.
“As the OECD has recommended, a broader review of Malaysia’s tax system will be needed to address the fiscal imbalance caused by the pandemic.
“All options should be on the table and thoroughly evaluated, and GST as you would expect, would form part of that discussion,” he said.