KUALA LUMPUR: With global environment expected to be challenging in 2023 and Malaysia’s current fiscal space remains fairly tight, the Federation of Malaysian Manufacturers (FMM) believes the revival of the Goods and Services Tax (GST) will be a timely lifeline for the country’s debt dilemma as well as to shore up fiscal buffers in order to weather the next economic downturn.
FMM called on the government to reintroduce the GST in the coming revised 2023 Budget at a rate that will not burden the rakyat but still help widen its revenue base to enable a faster reduction in the fiscal deficit and lower government debt ratio substantially.
The federation proposed the reintroduction of the GST (GST 2.0) be implemented only from 2024, bearing in mind that the government’s focus now is the revival of the economy and manufacturers will need to prioritise their resources on rebuilding their business, FMM president Tan Sri Soh Thian Lai said in a statement today.
“As this broad tax base system will increase indirect taxes, it will give flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination,” he added.
In this regard, Soh said, GST 2.0 implementation should not be considered in isolation but as part of the holistic assessment of Malaysia’s tax system, which will require the government to consult all stakeholders for a thorough review process.
Based on the FMM-MIER Business Conditions Survey First-Half 2022 conducted in August, close to three quarters (74%) of the respondents strongly supported GST to replace the current Sales and Service Tax (SST) as GST provides a fairer structure and it eliminates cascading and compounding of taxes commonly found in the SST regime, Soh said.
In addition, prices of Malaysian exports will become more competitive on the global stage as no GST is imposed on exported goods and services, while GST incurred on inputs can be recovered along the supply chain.
While the introduction of a broad-base consumption tax will strengthen the country’s fiscal position, Soh said GST 2.0 must be easy to manage and not increase the cost of doing business.