KUALA LUMPUR – The goods and services tax (GST) will not be implemented until the economy has completely recovered, said Finance Ministry Deputy Secretary-General of Treasury (Policy) Datuk Johan Mahmood Merican.
Bernama reported Johan as quashing the possibility of the tax’s reintroduction this year in response to a query at the Invest Asean 2022 conference today.
“No tax will be implemented until the economy has completely recovered,” he said.
Johan was among the panellists at the session held today titled “Malaysia: Economy at Crossroads”, alongside Bank Negara Malaysia deputy governor Datuk Abdul Rasheed Ghaffour and the Institute for Democracy and Economic Affairs director of economics and business unit and acting director of research Juita Mohamad.
The GST was introduced by the Barisan Nasional government in 2015 at a rate of 6%, and was later terminated by Pakatan Harapan when it took power after the general election of 2018. The PH administration replaced it with the sales and services tax (SST).
Prime Minister Datuk Seri Ismail Sabri recently said that the implementation and effects of the GST are being studied before a decision is made to revive it.
He had stressed in an interview with Nikkei Asia in Tokyo that no other nation besides Malaysia has reverted from the GST to SST.
Ismail said the nation lost RM20 billion in annual revenue after the GST was abolished and replaced with the SST.
Recently, the founding executive director of the Malaysian Institute of Economic Research, Tan Sri Kamal Salih, told The Vibes that the GST is needed now because it allows for a more efficient rate of tax collection as it is consumption-driven – while the current SST is only powered by taxing the services provided.
“The economy needs to be reset whether we like it or not. And yes, some of the proposed changes are structural and have to be radical if we are to head off the recessionary signs heading our way,” he said in an interview.
At the conference, Rasheed also emphasised that Malaysia’s condition differs from those of other nations and that it is crucial to normalise the interest rate in order to stimulate the economy.
“The Monetary Policy Committee’s decision to increase the OPR by 25 basis points was based on the country’s growth trajectory, which was on a firm footing, lifted by domestic demand, apart from manageable inflation and recovery in the labour market,” he said.
To further enhance the economy, he said, the nation needs structural reforms, including the pursuit of high value-added industries and the attraction of high-value foreign investment.
Rasheed explained that the interest rate hike would be done in a measured and gradual manner to foster sustainable economic growth and that any increase would take into account the timing and magnitude of market adjustment to the OPR rate increase.
“The adjustment of the market to the rate hike would rely on economic growth,” he said. – The Vibes, June 8, 2022
