Malaysia: Exemption of 40 Items from GST

There is more than a year to go before tge goods and services tax (GST) is implemented in Malaysia. Certainly there are concerns that it will lead to unnecessary taxation that will burden the poor and profiteering.

Today, the Finance Ministry has assured that some  40 basic goods and services will not be subjected to the new  (GST).These would include basic foodstuffs, residential accommodation, health services, public transportation and domestic consumption of water and electricity up to a certain limit.

The government will also at the same time  introduce an anti-profiteering law to ensure that businesses do not try to gain unjustifiable profits from GST.

The Najib administration is proposing the implementation of GST to broaden the government’s tax base and raise revenue.

In the region, only Malaysia, Brunei, Myanmar and Hong Kong have not implemented GST.
“If 143 countries have done it, why not us?" said Husni, the Second Finance Minister.

There has been some public concern that prices would be much higher post-GST implementation but Husni said that according to government calculations, the consumer price index, a measure of the inflation rate, would be lower.

Dr Zakariah Abdul Rashid, executive director of the Malaysian Institute of Economic Research (MIER), said that GST will not result in higher prices across the board but will be lower in some categories and higher in others.

He acknowledged however that GST will incur higher compliance costs but tax leakages will be reduced through more thorough auditing.

He also said that experience in other countries showed that consumers would stock up on items perceived to go up in prices ahead of GST but it would be a temporary effect.

“Consumption and growth returns to normal after a short period of time,” said Zakaria. “GST will result in a one off change in aggregate price level.”

He also suggested that the government provide rebates to cushion the effects of GST and that through GST, other forms of tax such as corporate and income may be reduced.

Husni said that the government would continuously look at ways to make Malaysia’s tax structure regionally competitive.

“We have reduced our corporate tax and we have shown to be willing to reduce personal income tax in specific instances (Iskandar),” said Husni. “The GST therefore should be seen as an integral part of the country’s economic strategy.”

As usual, it's Malaysia Boleh until it leaves a bad taste in the mouth!