Bring back GST when economy recovers

IT is alright to reintroduce the Goods and Services Tax (GST) but not at this economic climate where people are losing jobs and businesses are struggling due to the COVID-19 pandemic.

Speaking to FocusM, tax expert Veerinderjeet Singh proposed that that the government should first look into generating revenue from existing sources rather than introducing a new tax regime.

“When the economy is on an upward trajectory, then we can look into bring back the GST as it is a multi-stage taxation system,” said Veerinderjeet who is also Tricor Malaysia Sdn Bhd chairman.

One idea, he added, was to broaden the coverage of the Sales and Services Tax (SST).

“Our current SST system only covers about 38% types of products and services. The GST had a reach of about 70% types of products and services.

“So, if we expand SST’s coverage, we can see government revenue going up,” noted Veerinderjeet, who is also Malaysia Institute of Accountants president.

The important thing, he said, is for the government to monitor businesses’ compliance to the tax regime and grant the Customs Department more power to enforce it.

“If everyone complies and the enforcement is effective, we can see SST bringing in enough revenue to match the GST,” said Veerinderjeet.

On other ways to boost national coffers, he said that the government has no choice but to pour in money to the economy despite leading towards higher fiscal deficit.

Veerinderjeet also said the government should put in place mechanisms to ensure the money spent reaches the right target group which are the disadvantaged and struggling business enterprises.

“For now, Minister in the Prime Minister’s Department Datuk Seri Mustapa Mohamed is saying the right things on how to improve our economy.

“But at the end of the day, it all boils down to the delivery system,” he said.

A lesson to all

Veerinderjeet deemed the current situation as a lesson to all where the government should always strive for a surplus budget during good times in order to prepare for rainy days.

“For example, Singapore has been having a surplus budget for many years. Now, they have enough to spend on their wage subsidy and other programmes to support its people.

“But I can see Malaysia being able to manage this economic downturn. I think the Budget 2021 will be an expansionary budget to mitigate the fallout of the COVID-19 pandemic,” said Veerinderjeet.

Meanwhile, K Konsult Group chief executive officer Koong Lin Loong said the government should implement the GST as soon as possible to finance its stimulus packages.

However, he said the government should start with a lower rate of between 2% and 3% so that it would be affordable to the masses.

“But the government must have a projection on when they will go back to the 6% rate. Maybe a yearly increase of 1%,” said Koong, who is also the Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) National Council cum SME chairman.

Justifying his idea, Koong said that before GST was implemented back in 2015, the government was collecting about RM17 bil from SST annually.

GST prevents leakages

However, when GST was introduced on April 1, 2015, the government generated about RM 20 bil in revenue within eight months of implementation.

“And in 2016 and 2017, the government generated about RM40 bil annually. So if the Pakatan Harapan government had not abolished the GST, we would be having between RM43 bil and RM45 bil yearly.

“So, GST is definitely a better way to generate revenue for the government,” said Koong.

Whether expanding the SST base would generate the same revenue like GST, Koong replied in the negative.

“It will be difficult to expand SST’s scope. It’s easier to just bring back the GST as the mechanisms are already in place and the public are already exposed to it,” he said.

Koong, who was also a task force member of the GST programme, said GST would also prevent leakages as it would make business transactions transparent and easier to scrutinise.

“The government can keep tabs on projects costs and government purchases. All we have to do is to supplement the GST with strict protocols on government projects,” he added. – Oct 20, 2020

Subscribe and get top news delivered to your Inbox everyday for FREE