Joe Ghani: Existing taxation model unsustainable

FORMER second finance minister Datuk Seri Johari Ghani said the current taxation model is unsustainable and could see the country accumulate “uncontrollable debt” if mitigation measures are not implemented in today’s parliamentary session.

The Titiwangsa MP told the Dewan Rakyat he was concerned about the sustainability of the taxation model when taking into account the amount of interest for loans and other expenditures the government had to bear.

“Neighbouring countries in ASEAN had on average a higher percentage of tax collected compared to their gross domestic product (GDP). For example, the tax collected by the government in Thailand amounts to 14.1% of the GDP, in Singapore 13% and Vietnam 22.7%. Compared to us, it’s 11.5% (of the GDP).”

Ahmad Maslan (Photo credit: Bernama)

Johari asked the Finance Ministry to explain whether Malaysia’s tax collection model was comparable to its ASEAN neighbours and if the government could ensure that it did not continue to accumulate debt.

In his response, Deputy Finance Minister Datuk Seri Ahmad Maslan agreed that the present taxing strategy – with tax revenue averaging 11.5% of GDP between 2018 and this year – was unsustainable.

“The government was also working on a targeted subsidy mechanism for diesel, with a proposal expected to be completed in the second quarter of the year. We want to expand the tax revenue base, improve the tax structure and legislation as well as provide tax incentives,” he added.

According to the Pontian MP, Putrajaya had also implemented a medium-term revenue strategy for the next three years. He said a fiscal responsibility Act would be tabled in Parliament this year as another measure to resolve the government’s increasing debt. — March 30, 2023

Main photo credit: The Edge Markets

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