WHILE many experts have earlier flagged the unlikeliness of changes to tax relief and structures in Budget 2024, it is still disappointing to note that Prime Minister Datuk Seri Anwar Ibrahim did not take this opportunity to take bolder steps to introduce a more competitive tax structure in this budget, said a think tank.
The MCA-linked Institute of Strategic Analysis and Policy Research (INSAP) said while it welcomed certain announcements from second annual Madani budget, it remained cautious with the decision to increase sales tax from 6% to 8% while the majority of Malaysians are still struggling to make ends meet.
“Despite assurance of exemption of food and telecommunication services from this increase, it is still a chance of it having a wide impact on prices, especially sales tax is now imposed on logistic services,” said INSAP deputy chairman Datuk Dr Pamela Yong and deputy director Kat W. Wong in a statement on Monday (Oct 16).
“While sales tax does not impact business bottom line, it is still an additional cost burden to the consumers and it will be difficult for the enforcement to check on businesses that take this opportunity to raise prices.”
They said in spite of the “generally neutral” position among tax experts on the introduction of the Capital gain Tax (CGT) at 10% on unlisted shares, they are concerned that this would have a deep impact on private equity and acquisition activities among small and medium enterprises (SMEs).
“As there are still lack of details relating to the implementation of CGT, INSAP wishes that the government would spend the next few months to work out the CGT mechanism including giving clarity to definition and conditions for exemption for restructuring of shares within the company or group, and the valuation method for the disposed shares,” Yong and Wong said.
“INSAP has also received feedback from representatives from MSMEs that the rate of 10% is tad too steep and would stifle motivation of private equity and investments.”
Meanwhile, they said the rebranded luxury items tax High Value Goods Tax now set between 5% and 10% beginning 2024 has also caused a stir among retailers and consumers as the government has yet to clarify the items that fall under the “high value” category.
“Since foreign tourists will be exempted from paying the tax, we hope that the government would provide the estimated projected revenue from this new tax deriving from Malaysians alone,” Yong and Wong said.
“In all, INSAP welcomes the government’s effort to seek new tax revenue to fund the nation’s next phase of development but we feel that it would have been more efficient for the Finance Ministry (MOF) to implement the Goods and Services Tax (GST) given its broad tax base and the fact that all essential items would have been exempted or granted zero tax rate.”
They said the think tank has also been consistent about its position on the Goods and Services Tax (GST) as a more efficient tax system albeit the weaknesses in its implementation and roll-out in 2015.
“It is after all a more transparent tax system facilitating a more reliable revenue for the government,” they remarked.
“The re-introduction of GST would have eliminated the need for new taxes especially in the form of high value goods tax, or any other tax or levies on the higher income group.
“With proper execution of the GST mechanism and more efficient management of rebates, GST could potentially bring in more revenue to the government compared to the Sales & Service Tax (SST) and eliminating the need to increase sales tax.”
For the record, Malaysia collected GST amounting to RM37.9 bil in 2015, RM59.3 bil in 2016, RM67 bil in 2017, and RM36.7 bil in 2018 before it was abolished. In comparison, Malaysia expects to collect RM35.8 bil from SST in 2024. – Oct 16, 2023
Main pic credit: Malay Mail
