JULY 30 — As the Malaysian government struggles to keep the economy afloat by injecting a series of stimulus packages to keep consumer spending alive and revitalise the economy, its public coffers come under serious pressure as its fiscal deficit deepens, threatening the government to plunge into...
JULY 30 — As the Malaysian government struggles to keep the economy afloat by injecting a series of stimulus packages to keep consumer spending alive and revitalise the economy, its public coffers come under serious pressure as its fiscal deficit deepens, threatening the government to plunge into further debt in the midst of the Covid-19 pandemic.
The reasons for their implementation of the GST is rather straight forward. One of the biggest reasons has to do with a problem in tax collection called attrition, which is a bane for every tax collector. This means that, though GST covers all economic sectors, it can be zero-rated for essential sectors especially for essential services and those consumed by the lowest-income group.
According to a LHDN study, Malaysia’s tax to GDP ratio is at 13.6 per cent in 2016, 13.7 per cent in 2017 and 12.8 per cent in 2018, compared to the OECD average of 34.2 per cent. This sits very well in the middle of Asean countries in 2017, with the highest being Philippines and Thailand at 17.5 per cent and 17.6 per cent respectively.
This goes to show that the implementation of GST has progressively brought more revenue to the government’s coffers throughout the years, even though our tax to GDP ratio is still quite low compared to its Asean neighbours. This means that tax revenue from GST has been more efficient for Malaysia, as it covers a wider ground, leaving very little room for loopholes and tax evasion.
But as we now struggle financially to keep the economy afloat, in retrospect a solid GST regime would have given us more fiscal space to save our economy from a free fall.
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