MALAYSIA might have missed out on a substantial RM19 bil in tax revenue last year due to its choice of taxation system, said World Bank Malaysia lead economist Apurva Sanghi.
He argued that had Malaysia stuck with the goods and services Tax (GST) instead of opting for the sales and services tax (SST), the country could have potentially generated this additional revenue.
Based on the percentage of tax revenue to the gross domestic product (GDP), Sanghi’s analysis revealed that in 2017, the GST contributed RM44 bil, making up about 2.8% of the GDP.
In 2022, an equivalent amount for 2.8% of the GDP would have been RM50 bil. However, the SST, implemented in 2022, only contributed RM31 bil in tax revenue, resulting in a significant RM19 bil shortfall.
“That would have been 61% more raised via GST than SST!” Sanghi emphasised on the social media platform X, formerly known as Twitter.
Small point on GST vs SST:
GST raised in 2017=MYR 44b
SST raised in 2022=31b
Rev Gap=13b & *negative* once you take into account 19b GST refund
Correct but misleading!
This is ‘cos M’sia nominal GDP was ~30% > in 2022 vs 2017
So we should look at % of GDP raised & not RM…
— Apurva Sanghi (@ApurvaSanghi) October 4, 2023
Contrary to some arguments that SST revenue is comparable to that of the GST, Sanghi clarified that the apparent revenue gap appears smaller due to Malaysia’s nominal GDP being about 30% higher in 2022 compared to 2017.
Moreover, Economy Minister Rafizi Ramli last month acknowledged the potential revenue gap and expressed the government’s openness to exploring avenues to widen its tax base including reintroducing the GST.
However, he stated that there were no immediate plans for GST reintroduction, with the government’s focus currently on developing and rolling out the capital gains tax in 2024.
In March, Deputy Finance Minister Datuk Seri Ahmad Maslan told Parliament the net revenue for GST was RM27.3 bil in 2015, when it was introduced to replace SST. While in 2019, the government gained RM27 bil from SST, which was reintroduced by the Pakatan Harapan government in 2018.
Critics argued it disproportionately burdened lower-income groups who were exempt from income tax while proponents believed that a carefully structured GST, with low rates and exemptions for essential goods and services could efficiently capture tax revenue and prevent leakages, especially when compared to the opaque SST system. – Oct 4, 2023