‘SMEs prefer GST over SST’
KOTA KINABALU: The Institute of Strategic Analysis and Policy Research (INSAP) wants the government to reintroduce the Goods and Service Tax (GST) in replacement of the Sales and Service Tax (SST). This is in view of the government’s half-hearted attempt to boost its revenues with the introduction of the Low Value Goods in January 2024 and the High Value Goods in March later in the year.
In a press statement on Wednesday, Datuk Dr Pamela Yong who is the chairman of INSAP said, “Through our dialogues with the various business associations, GST is still the preferred choice of taxation system due to its transparency and fairness.”
The abolishment of the GST in 2018 resulted in a significant revenue shortfall as a recent article published by INSAP highlights that the GST generated a robust RM44 billion in 2017, contributing significantly to the national coffers. It has been estimated that the GST, had it not been abolished, it would have collected around RM63.5 billion instead of RM35.8 billion in 2024.
The president of Malaysia Chinese Association (MCA), Datuk Seri Ir. Dr Wee Ka Siong has also recently highlighted that the GST being a far more efficient tax system than then SST. Even with proposed expansions like the LVG and HVH, SST is projected to fall far short, raising concerns about the government’s ability to meet its financial obligations.
The LVG is only expected to collect, at best 200 to 300 million per annum compared to 2024 GST collection estimates of RM63.5 billion.
INSAP is of the view that the SST and proposed new taxes like the LVG and the HVG also disproportionately impact vulnerable groups.
By focusing on specific goods and services, these measures often place an undue burden on lower- and middle-income groups (B40 and M40) who rely on those goods and services.
This regressive nature of the taxes contradicts the government’s stated goal of promoting social equity and inclusive economic growth. While GST is well recognised in many advanced countries to have a far better outcomes in term of collection due to its broadband nature.
Pamela says that “it was a grave mistake to have abolished the GST in 2018 in the first place.”
“The priority is to address the people’s burden in having to face a downturn in the global economy. This requires stimulus packages and additional fiscal spending which could have been well supplemented by the GST, had it not been put to an end by Pakatan Harapan 1.0.
“It is time for Malaysia to put political expediency in the back seat, swallow our pride and reinstate the GST for the sake of the people. LVG and HVG are band aids just to plaster over the weaknesses of the SST but the GST is the real deal in getting our federal budgets to an even keel.”