The Goods and Services Tax (GST), despite criticisms on its implementation two years ago, has undeniably helped boost Malaysia’s economy.
Director at Hernancres Tax Consultancy Sdn Bhd, Desmond Anil, said the tax system, which came into force on April 1, 2015, has enhanced the nation’s growth.
The tax expert said the taxes had been spent to stimulate the Entry Point Projects which were part of the 12 National Key Economic Areas (NKEAs) that would contribute towards the Malaysian Economic Growth measurable by the National Gross Income indicator.
The NKEAs, as the core Economic Transformation Programme, comprised selected sectors of economic opportunities for the private sector which would drive Malaysia towards high-income status and global competitiveness, he said.
“As an example, it had contributed in building infrastructure such as the Mass Rapid Transit, revitalised the oil and gas sector, encouraged the growth of digital economy as well as the halal industry,” he told Bernama.
He said as of the second quarter of this year, the nation’s gross domestic product rose by 5.8 per cent from a year earlier, after climbing 5.6 per cent in the first quarter.
Not only had it spurred the economic growth, indirectly, the tax system had provided structure into business compared to the previous taxation system, he said.
“Before GST, there was the Sales and Services Tax (SST). It did not provide a taxation structure. But when SST was abolished and GST was implemented, check and balance occurred which led to the creation of a business trail,” he said.
Besides that the tax system had managed to prevent leakages as there would be a documentation trail compared to SST as the businesses would now be more vigilant and have further business plans, he said.
“The tax had managed to filter goods and bad businesses and made entrepreneurs think thoroughly before venturing into new businesses,” he said.
Desmond, saying that there were ups and downs in the implementation of GST, also said that the taxation system in the country was still considered new and it would take five to six years for it to reach maturity and stability.
He said even though Malaysia’s GST rate was among the lowest in the ASEAN, it was best to retain the rate as any changes could distort business operations.
“If the tax system is not being implemented properly, it will hamper businesses from taking place,” he said.
Meanwhile, Prime Minister Datuk Seri Najib said the GST should not be considered an additional new tax but part of a comprehensive tax reform that was designed to make Malaysia more competitive, control the black and illegal economy, reduce tax evasion and broaden the overall tax base.
Najib, who is also Finance Minister, said since Malaysia implemented GST in 2015, many other countries such as India and Egypt had followed suit.
All the Gulf Cooperation countries, including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, would implement their GST on Jan 1 next year, he said.
“And our economic plan has led to Malaysia’s GST rate only needing to be six per cent – far lower than other countries who don’t share our strong economic fundamentals,” said Najib in his blog post titled ‘My Economic Vision For Malaysia’, today.