KUALA LUMPUR – Although the goods and services tax (GST) is a superior taxation system, reintroducing it at this point will be a political and economic disaster for the government.
Institute for Democracy and Economic Affairs CEO Tricia Yeoh said Putrajaya should not reintroduce GST in Budget 2021 as the country continues to grapple with the impact of Covid-19.
“At this point in time, I would probably say no (to reintroducing GST). The people are strapped at the moment. But in the longer term, probably after Covid-19, it needs to be seriously considered.
“It’s a much more efficient tax collection system (compared to the sales and services tax, or SST). We regressed when we went back to SST (in September 2018),” she told the “Budget 2021: Powering Through a Pandemic” webinar conducted by The Vibes yesterday.
She was asked if the government should reintroduce GST in the Budget to be tabled tomorrow, seeing as to how the country is in need of a further fiscal injection to cushion the blow from the pandemic.
GST, which came into force on April 1, 2015 at a rate of 6%, was met with strong protest from various quarters, who said it would be a burden.
The then Barisan Nasional government argued that it was a more transparent and efficient tax system and less prone to leakage, while maintaining that the prices of goods would generally remain the same, if not lower.
However, following Pakatan Harapan’s victory in the general election in May 2018, and in keeping with its election manifesto, GST was immediately zero-rated before being abolished four months later.
Since then, various quarters, including economists, have called for a reintroduction of the tax, saying it promises better revenue for the government.
Yeoh said should Putrajaya decide to implement GST in the future, it should start at a lower rate, and zero-rate goods and services mainly consumed by low-income groups.
For Budget 2021, she said, more emphasis should be placed on taxing the rich.
“I have no issues with the government giving cash handouts to lower-income groups, but the focus should also be on taxing the rich. A progressive tax-based system should be the way to go.” – The Vibes, November 5, 2020
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