THE government’s latest budget announcement for 2024 has ignored widespread calls to reintroduce the goods and services tax (GST).
Despite the outcry from citizens, business communities and associations, the government has chosen to increase the rate of the sales and services tax (SST) to 8%, a decision deemed by many as detrimental to the financial stability of the average Malaysian.
“The current tax rate in Malaysia is indeed lower than that of neighbouring Singapore and Thailand while the government’s proposal to restructure the taxation system to expand the tax base is necessary. However, opting to increase the rate of the SST is akin to prescribing the wrong medicine for an ailment,” said MCA spokesperson Saw Yee Fung.
Saw noted that while certain essential items such as food, beverages, and telecommunications have been exempted from the 2% SST spike, consumers are still burdened with increased costs in areas like credit cards, insurance, medical care, logistics, e-hailing, air tickets, accommodation, broadband and professional services.
Moreover, Saw pointed out that the burden will fall disproportionately on the shoulders of the middle-income group (M40) who consume more in these areas compared to the lower-income group (B40) and have less purchasing power than the higher-income group (T20).
This move contradicts the government’s claims that the financial burden on citizens will not increase, leaving many Malaysians questioning the fairness of the taxation system.
One of the main criticisms of the SST system is its inability to effectively curb tax evasion. Unlike GST, SST lacks the transparency needed to deter tax dodgers, which has led to concerns that the government’s attempt to widen the tax net might backfire, resulting in lower tax revenue collection.
Furthermore, the government’s proposal to launch electronic invoices, while a step in the right direction, raises doubts about its effectiveness and the timeline for its full implementation.
Without a comprehensive strategy to address tax evasion, the move to increase SST appears hasty and poorly thought out. – Oct 15, 2023