Malaysia to retain SST, incorporate selected GST elements, says Liew
PETALING JAYA: Malaysia will retain the sales and service tax (SST) system while incorporating suitable elements of the goods and services tax (GST) to prevent cascading tax effects, Deputy Finance Minister Liew Chin Tong told the Dewan Rakyat today.
Liew said the government’s position was to improve the existing system without broadly shifting the tax burden to consumers.
READ MORE: Govt open to combining GST, SST elements for tax reform
READ MORE: PM Anwar rules out core principle of GST, open to SST tweaks
“The existing system is SST, but there are GST elements, such as ensuring there is no double effect in the tax system, that will be included in the existing system.
“This means our system is SST, but we take elements from GST where we ensure there is no cascading element, no cascading effect in what we have,” he said.
He was responding to Datuk Seri Hamzah Zainudin (PN-Larut), who asked whether the government intended to retain SST or move towards a new tax regime combining SST and GST elements.
Hamzah said businesses needed clarity to plan ahead, citing earlier remarks by Prime Minister Datuk Seri Anwar Ibrahim on a possible new tax regime incorporating SST and GST elements, as well as Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi’s call for GST to be reintroduced.
Liew said SST was being maintained because it was easier to understand and had been in use for more than 50 years.
He said while many had proposed GST on the grounds that it was used in other countries, the system was not necessarily the best option for Malaysia.
“Why do we want to continue with SST? Because SST is easier for everyone to understand and has a history of more than 50 years.
“Many people propose GST because they feel it has been practised by other countries, and GST started in France in 1954.
“Why is GST not necessarily the best system? Because GST requires 480,000 collecting parties. This means 480,000 companies will be made collecting agents.
“But SST requires only 80,000 companies. This is the difference between the two systems,” he said.
Liew said GST also had a direct pass-through effect on consumers, which made it attractive to businesses but could shift the burden to the public.
“What we want to create is a system where we do not disturb the majority.
“GST has a direct pass-through to consumers. This means consumers will bear everything, and businesses do like it because they can pass it through directly.
“What the government wants to create is a balance so that consumers are not disturbed, and for businesses, we ensure there is no cascading effect,” he said.
The clarification follows Anwar’s remarks on Aug 18 that the government was open to studying ways to incorporate acceptable GST elements into SST to make the tax system more progressive.
Anwar had said then that Malaysia would retain SST but could consider certain GST features if they improved the system.
Ahmad Zahid, in his Umno policy speech on Sept 11, had called for GST to be restored at a more reasonable rate and rejected the idea of a hybrid GST-SST system.
