Malaysia launches un­pop­u­lar con­sump­tion tax

The China Post - - WORLD BUSINESS -

Malaysia on Wed­nes­day im­ple­mented a six-per­cent con­sump­tion tax aimed at plug­ging a leaky tax­col­lec­tion sys­tem and ad­dress­ing a widen­ing fis­cal deficit, but which has sparked op­po­si­tion protests over the past year.

The gov­ern­ment and econ­o­mists say the Goods and Ser­vices Tax (GST) will help ad­dress an in­ad­e­quate rev­enue-col­lec­tion sys­tem un­der which in­come tax is cur­rently paid by only an es­ti­mated 11 per­cent of reg­is­tered com­pa­nies and 14.8 per­cent of em­ploy­ees.

But the GST has prompted demon­stra­tions by op­po­si­tion par­ties, who say con­sumers were be­ing left with the bill for gov­ern­ment mis- man­age­ment of the econ­omy.

Prime Min­is­ter Na­jib Razak on Mon­day said the GST — which does not ap­ply to sta­ple food items such as rice, sugar and cooking oil, as well as some medicines — would not over­bur­den con­sumers.

“At the same time, we will raise the na­tion’s rev­enue, and this is for the peo­ple’s good,” he was quoted as say­ing by Malaysian me­dia.

The gov­ern­ment says the GST will raise an es­ti­mated 22 bil­lion ring­git (US$6 bil­lion) in ad­di­tional rev­enue each year.

It hopes to trim its fis­cal deficit to 3.2 per­cent of GDP in 2015, com­pared to 3.5 per­cent last year. An ear­lier 2015 tar­get of 3.0 per- cent was scrapped in the wake of the global oil price rout that set in last year.

Malaysia is a net oil ex­porter, and a 60 per­cent drop in crude prices in the lat­ter half of 2014 prompted the World Bank in Jan­uary to shave its 2015 GDP growth fore­cast for Malaysia to 4.7 per­cent from an ear­lier 4.9 per­cent.

The ring­git cur­rency has also plum­meted on oil-linked con­cerns, as well as in­vestor fears for the sta­bil­ity of a trou­bled gov­ern­ment in­vest­ment fund, 1Malaysia Devel­op­ment Ber­had (1MDB), which is mired in US$11 bil­lion of debt.

Ke­nanga Re­search econ­o­mist Wan Suhaimi Saidi said the GST would broaden the tax base.

AP

(Right) Bern­hard Maier, mem­ber of the Ex­ec­u­tive Board of Man­age­ment of Porsche, sits in the new Porsche Boxster Spy­der at the New York In­ter­na­tional Auto Show on Tues­day, March 31.

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