SST reimplementation will create uncertainty in prices of goods
KUALA LUMPUR: The belief that the prices of goods will go down if the Sales and Services Tax (SST) is reimplemented in place of the Goods and Services Tax (GST) is a myth.
Hernancres Tax Consultancy Sdn Bhd Director, Desmond Anil, said contrary to popular belief, the consequences would be the opposite.
“SST has a cascading effect on the prices of goods as businesses registered for SST will be recovering the tax through the increase in the costs (of business) and this would result in high prices,” he said in an interview with Bernama.
Desmond explained that the uncertainty in pricing created from this move was only a fraction of bigger concerns, which included cross-border trades and transfer pricing from inter-company transactions.
“GST has been implemented across-the-board since three years ago and by abolishing it now, it will have a huge impact on trade being conducted,” he said.
From the tax angle, Desmond stressed that the current system was already good enough, with a taxation structure in place that provided checks and balances and led to the creation of business trails.
“Reverting back to SST might be a popular move, but based on tax characteristics and the fundamentals that form GST, I do not see any tax system that can be better,” he said.
GST was introduced on April 1, 2015 with a rate of six per cent to replace SST, which was in place with a rate of 10 per cent.
In the early days of its implementation, the government said that GST was needed to cushion the impact of falling oil prices, which fell to US$60 per barrel before dropping further to US$30.28 in early 2016, the lowest since the financial crisis of 2007-2010.
As of today, oil prices are close to the US$70 per barrel level, and many have questioned the need for GST since Petronas recorded a net profit of RM45.4 billion last year.
The national oil corporation is set to pay RM19 billion in dividend to the government for 2018, higher than the RM16 billion in 2017.
However, Desmond pointed out that the perception of GST as a supplementary income to the government when there are low oil prices was incorrect.
“The general understanding of GST being a second revenue to the government when oil prices are low is a narrow way of looking at it as the tax itself is a broad-based tax and very much transactionbased,” he said.
GST is a tax system that was implemented across-theboard upon expenditure and the government has exempted various household items, oil and gas import and services such as management of strata units, building of schools and others.
The implementation of GST was among the reasons the government was able to reduce the country’s fiscal deficit from 6.7 per cent of gross domestic product in 2009 to 3.1 per cent in 2016.
Last year, a total of RM42 billion in GST revenue was collected. — Bernama