THE goods and services tax (GST) should not be regarded as a golden bullet to solve Malaysia’s tax revenue issues.
Without an effective government agency to oversee monitoring and enforcement, any taxation system will eventually falter whether it is GST or SST (sales and service tax), according to Tricor Malaysia chairman Dr Veerinderjeet Singh.
“The real strength of a GST is that it is a system with greater checks and balances and allows for more effective audits as the GST can be applied all along the supply chain,” he told FocusM.
“If we do not have a society which is compliant and is unwilling to contribute a fair share of taxes from its earnings, we will fail.”
Henceforth, Veerinderjeet proposed a widening of the scope of existing consumption taxes in Malaysia (sales tax and service tax) while endeavouring to impose a low tax rate, educate businesses, enforce the taxes and monitoring the results.
“Over time, we could increase the tax rate and this could go hand-in-hand with corporate tax rate reductions and eventually – when ready – we can mould the sales tax and service tax into a tax similar to a GST with its in-built controls,” he opined.
“However, the key enabler of all this must be technology and a strong willingness to reform.”
Veerinderjeet was commenting on the recent proposal by the Organisation for Economic Cooperation and Development (OECD) that the Government may need to consider re-introducing GST as part of its medium-term fiscal strategy.
Based on its third economic survey on Malaysia, OECD said the Government needed to strengthen its tax compliance and efficiency of tax collection while securing the transparency of its enforcement.
It further noted that the introduction of GST in 2015 has helped shore up the Federal Government’s revenue considerably.
“The other revenue measure (which may not be welcomed by many) is to impose a special excess profits tax at say 5% on entities that generate profits above a specified threshold,” suggested Veerinderjeet who is also president of the Malaysian Institute of Certified Public Accountants ( MICPA).
“This will be for a limited timeframe only with the extra funds meant for healthcare spending which is essential now.”
Elsewhere, Veerinderjeet said there is a need to focus on the shadow economy, simplicity, efficient tax administration, removing various unnecessary tax exemptions and incentives as well as the Government being accountable and transparent on how the tax revenue is spent.
“Cutting down operational expenditure of ministries is an absolute must,” he added. – Aug 13, 2021
