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By Murray Hunter
FORMER health minister and Umno member Khairy Jamaluddin, popularly known as KJ, has renewed calls for the government to reinstate the goods and services tax (GST) that the Pakatan Harapan government ended back in 2018.
KJ argued that the current sales and services tax (SST) lacks the broad scope that the GST had.
He said that the GST would assist the government in increasing the revenue it needed to cover spending.
KJ suggested that the GST could be rebranded as a “fair and equitable tax” or “Madani Tax” to soften public perception.
Malaysia introduced a 6 per cent GST in 2015 under the former prime minister, Datuk Seri Najib Razak.
The GST proved to be unpopular, leading to complaints that there was an excess burden on lower and middle-income groups. Secondly, the GST brought with it high and tedious administrative costs for businesses that contributed to a rise in the cost base.
The elimination of the GST became a top political issue during the 2018 election campaign, which assisted in bringing Pakatan Harapan to power.
The truth about GST suitability for Malaysia
If you ask any economist about the GST, most will tell you that this is a very efficient tax system that greatly assists governments in collecting revenue needed to finance budget spending and deficits.
In an era where traditional sources of revenue are falling, i.e., oil revenue, the introduction of a GST will assist in alleviating revenue shortfalls as it will collect more revenue than the traditional SST system.
Most economists will also tell you that the rise in community living costs due to the introduction of a GST will be one-off.
However, the reality is that the GST is a regressive tax.
A regressive tax taxes the poor at a higher proportion of their incomes than the rich. The richer you are, the less the imposition of a GST will affect you financially.
But a GST on a wide selection of basic items can be financially crippling to those with low incomes.
That’s why the GST introduction back in 2015 had hundreds of exemptions, turning it into a hybrid GST, rather than a true GST system.
The fact is that a GST takes from the poor more than it takes from the rich.
The middleclass are burdened, they will have a much higher incidence of tax than they do currently under the SST.
GST is successful when it is introduced into a nation with tax relief for the poor, such as a guaranteed minimum monthly income system.
This is something Malaysia doesn’t have, which should end any talk about reintroducing the GST.
It's fine for the wealthy top echelon of the community to argue for the introduction of the GST when they will not feel the weight of a heavier tax on their individual consumption.
Any introduction of a GST must consider social equity
GST is a tax against the poor unless it is part of a much bigger tax reform package.
The current SST system, merged with the customs duty system for imports, can be used to develop a much more equitable tax system where the rich pay more tax rather than the poor with GST.
GST might be great for developed economies. However, as the GST in Thailand implementation shows, most of the informal economy actually escapes it.
What was found in Malaysia during the three years of GST was that food stalls and micro-enterprises had to pay for supplies loaded with GST, but couldn’t get this money back from consumers due to being small and in the informal economy outside the GST system.
Anyone who suggests the introduction of a GST in Malaysia as an election promise will pay heavily.
The public is against it. Its indeed very easy for those in comfortable positions to recommend such things. – May 12, 2026