Malaysia needs GST to hasten economic recovery, says Ahmad Zahid
PUTRAJAYA: Malaysia needs to introduce a resilient tax regime such as the goods and services tax (GST) so its economy can bounce back quicker from the impact of the Covid-19 pandemic, says Datuk Seri Dr Ahmad Zahid Hamidi.
The Barisan Nasional chairman and Umno president said Malaysia “went backwards” when it decided to ditch the GST and went for the sales and services Tax (SST) instead.
He said the Malaysian tax system has to-date seen some progress, though not at the desired speed nor completeness in certain areas of tax reform.
“Over the years, most of the changes to the tax provisions announced during the Budget were merely the tweaking of tax provisions which were not necessarily impactful.
“It is now timely that the government introduces a structured approach in reforming the Malaysian tax system which yields the desired outcome palatable to most taxpayers including foreign direct investors that are looking for suitable business bases in the region.
“As we are moving out of the Covid-19 pandemic, I believe we need a resilient tax regime that meets the needs of all sectors, including the people,” he said in a closing speech at the Malaysia Tax Policy Forum 2022 here on Monday (Aug 1).
“I personally would prefer the re-introduction of GST. I believe some of you agree with it. Some may not. However, we should reform it to tailor it with time.
“As most countries are still reeling from the pandemic, we must be able to weigh it to our domestic and international markets,” added the former deputy prime minister.
Ahmad Zahid’s speech was read by Barisan Nasional secretary-general Datuk Seri Zambry Abdul Kadir.
He also proposed that a study be conducted on the possibility of reintroducing the GST in Malaysia.
“As Malaysia gears up for full economic and fiscal recovery following the unprecedented pandemic, do gear up the nation with an attractive tax policy.
“Sometimes we need to try rather than cry,” he said.
Ahmad Zahid said Malaysia’s target for tax revenue collection this year was RM171.4bil, which was about 10.5% of the country’s gross domestic product.
“As of April, direct tax collection stood at RM45.6bil, which is 35.8% of the target.
“There are a lot of rooms for it to multiply in 2023, provided that we explore new elements that can elevate our economy,” he said.
Ahmad Zahid said there had to be a good reason that over a third of countries in the world had implemented a similar tax regime.
“While one third of the countries in the world subscribed to the GST, Malaysia abandoned it.
“It was our biggest setback. It was beyond comprehension to see how the nation has gone backward in ditching a tax policy which was far much better and rewarding than the SST.
“The objective of GST is to drive the nation towards becoming an integrated high-income economy, by charging uniform tax rates and eliminating economic barriers, thereby making the country a common national market,” he said.
Ahmad Zahid added that it also provided a major lift to the government’s ‘Made in Malaysia’ campaign, as goods that were produced or supplied in the country would be competitive not only on domestic markets, but also internationally.
“We need to study the logic that has driven more than 170 countries implementing the GST.
“Our leading economists should, by now, be able to make comparisons between the GST and SST,” he said.
On a law to regulate political funding, Ahmad Zahid said Barisan was hoping that it could be put in place before the next general election.
“The Political Funding Bill is important to avoid the risk of corruption and abuse of power by politicians.
“Corruption and the ‘buying and selling’ of elected representatives were so rampant under previous governments, which saw 39 MPs and assemblymen ‘changed hands’ over money and power.
“Political funding can be right and wrong, depending on how we manage it,” he said, adding tha Barisan was consistent with all the reforms to restore political stability in the country.
“We hope to put it in place before the next general election. Nevertheless, it will be a significant milestone to the Parliamentary reform because it gets political parties to stop practising it, and that transparency and accountability prevail,” said Ahmad Zahid.