Former economy minister and Pandan MP Datuk Seri Rafizi Ramli has expressed strong concern over the possible reintroduction of the Goods and Services Tax (GST), warning that it could disproportionately affect lower-income households while fueling inflation.
In a recent episode of the Yang Berhenti Menteri podcast, Rafizi stressed that GST functions as a regressive tax, meaning those with lower incomes would bear a heavier burden compared to wealthier individuals. Under the current sales and service tax (SST) framework, households below the income tax threshold are exempt from direct taxation. However, GST would compel these families to pay tax for the first time, as it would be applied to essential goods and services.
According to his estimate, such a move could translate into an additional RM1,000 to RM2,000 in yearly expenses for households that have never previously been taxed. Drawing on the 2015 implementation as an example, he noted that prices had increased by approximately 6% to 7% at the time. He further remarked that in Malaysia, once prices escalate, they rarely decrease.
Rafizi urged policymakers to prioritise keeping inflation close to 2% and to undertake wage reforms before contemplating GST. He argued that introducing the tax without such measures could worsen living costs and widen income disparities.
His remarks align with earlier cautionary statements made in 2023, when he acknowledged GST’s potential in curbing tax evasion but warned against using it as a quick fix for revenue generation without addressing structural inefficiencies in governance and public spending. He had also cautioned that governments might become dependent on GST revenue, gradually increasing the rate from 5% to potentially as high as 20%.
While critical of its immediate reintroduction, Rafizi has not entirely dismissed GST as a policy tool. In September 2023, during his ministerial tenure, he described it as an option within broader fiscal sustainability strategies. At the time, the government’s attention was directed towards implementing a capital gains tax in 2024, with decisions on other taxes to be disclosed during budget announcements.
The proposal to revive GST has received support from certain quarters, including MCA president Datuk Seri Dr Wee Ka Siong and some economists, who suggest that it could be viable if accompanied by protective measures for vulnerable groups.
Nevertheless, the current unity government has deemed GST impractical for now. Finance Minister II Datuk Seri Amir Hamzah Azizan recently indicated that the prevailing economic conditions are unsuitable, while Prime Minister Datuk Seri Anwar Ibrahim stated that GST would only be considered once the economy strengthens and the national minimum wage reaches RM4,000 or higher.
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