Prices may go down, boosting consumer spending
KUALA LUMPUR: The government’s move to set the Goods and Services Tax (GST) at zero per cent from June 1 will theoretically reduce prices.
Economists, however, said there were other factors, such as currency exchange and administrative costs, which would contribute to the price movement of goods and services.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the move would generally lower the prices of goods and services.
However, he said the practice of some traders who refused to reduce their prices in accordance with the lower tax rate would be a challenge in keeping prices low.
“Theoretically, with the GST rate being reduced to zero level from six per cent, prices are supposed to drop.
“However, GST is not the only factor that causes high prices. There are other factors such as the foreign exchange rate, where a weak ringgit will result in lower spending power for imported goods.”
The Finance Ministry yesterday announced that the GST for all local and imported goods would be zero-rated from June 1,
This effectively scrapped the consumer tax implemented by the previous government on April 1, 2015.
The decision did not include goods and services listed in the Goods and Services Tax (Exempt Supply) Order 2014, which remained exempted from GST.
MIDF Amanah Investment Bank chief economist Dr Kamaruddin Mohd Nor said the move would spur consumer spending and ultimately drive the domestic economy.
Meanwhile, Mydin Mohamed Holdings Bhd (Mydin) managing director Datuk Ameer Ali Mydin said the move would generate higher corporate tax collection.
Ameer Ali said the government’s revenue might decline by about RM42 billion annually without the GST, but the move would allow people to spend more.
“The move will give confidence to the people to spend, and thus, help boost domestic consumption. This will allow the government to collect more tax from businesses,” he said at the launch of Mydin’s Girang Syawal Tiba 2018 campaign here yesterday.