Shift in taxation flaunts focus in 2018
KUALA LUMPUR: The shift in taxation in 2018 left many perplexed when the Goods and Services Tax (GST) was abolished by the Pakatan Harapan ( PH) government who took power upon winning the 14th General Election on May 9, to be replaced by the Sales and Services Tax ( SST) in September.
Though the GST was a good tax, its abolishment was part of PH’s election manifesto which had to be fulfilled.
However, the SST itself had served the country well prior to the implementation of the GST on April 1, 2015, and as former Finance Minister Tun Daim Zainuddin put it, “we have done it before, (for) 57 years there was no GST, there was no problem”.
In between the transition between the two taxes during the year, the government announced a three-month tax break which has directly boosted consumer spending.
With the SST, the government is expected to collect less revenue compared with the GST as the tax covers only 38 per cent of the items in the Consumer Price Index compared with 60 per cent under the GST system.
But the GST was not without its problems.
GST collection stood at RM27 billion in 2015, RM41.2 billion in 2016 and RM44.35 billion in 2017, but as of May 31, 2018, there were shortages to pay back RM19.4 billion in GST refunds.
This ‘ missing fund’ led to a probe by the Public Accounts Committee (PAC) and the findings are expected to be tabled during the March parliament sitting next year.
Finance Minister Lim Guan Eng said the government is committed to returning the GST refunds beginning next year.
Meanwhile, the government will encounter about RM21 billion shortfall in revenue from the shift in taxes this year as tax revenue for 2018 is expected at RM23.1 billion as against the RM44.35 billion collected in 2017.
As revenue from the SST for the period from September to December this year is estimated at RM4 billion, the net impact, therefore, is RM17 billion for 2018, Lim was reported as saying
To cover the shortfall, Lim announced that the government would set off RM10.4 billion of the RM17 billion in lost tax revenue through additional oil revenue and dividends from governmentlinked companies (GLCs).
The additional dividends from GLCs, including Petronas and Khazanah Nasional Bhd, are projected to be RM5 billion.
These measures taken would only be able to sustain for a short period and the government needs to find other alternatives.
In 2019, the tax revenue from the SST is estimated at RM22 billion.
Meanwhile, non-tax revenue contributed RM42 billion in 2017 and this is expected to rise to RM61.76 billion in 2018 and RM85.66 billion in 2019.
Non-tax revenue is obtained by the government from dividends and profits from profit-making government entities.
In order to ensure the stability of its coffers, the government in the 2019 Budget announced the introduction of excise duty for sugary drinks at 40 sen per litre on two categories of sugary drinks manufactured in the form of readytodrink packaging starting April 1, 2019.
The government has also proposed to increase the Real Property Gains Tax ( RPGT) for properties to be disposed of in the sixth year to 10 per cent for foreigners and companies and five per cent for Malaysian individuals, as well as impose a service tax on digital platforms, starting Jan 1, 2020. — Bernama