Malaysia should reintroduce GST to achieve a fiscal deficit target of 4.3% from the current 5%, said Chartered Tax Institute of Malaysia (CTIM) council member Alan Chung.
Chung said budget deficit can be reduced by either cutting expenditure or increasing revenue.
“Reducing expenditure, especially development expenditure, is out of the question as we aspire to have expansionary budgets,” he said today (Oct 25) in a statement.
Prime Minister Datuk Seri Anwar Ibrahim announced the government’s ambition to achieve a fiscal deficit of 3% during the tabling of Budget 2024 on Oct 13.
The government projected a fiscal deficit of 4.3% for 2024, which marks a significant decrease from the current target of 5% and 2022’s 5.6%.
Chung said broadening the tax base by reintroducing GST is an option as Malaysia has a relatively narrow tax base.
Malaysia’s tax revenue is merely 11.8% of its GDP in 2021 as compared to the average of 34.1% in OECD countries.
“There are various ways to broaden the tax base. The reintroduction of the Goods and Service Tax (GST), drummed loudly prior to the tabling of Budget 2024, would be one of them.
“GST has a far broader coverage but is still neutral to businesses. Apart from GST, other tax reforms can be introduced to reduce inefficiencies and increase the effectiveness of our tax collections.
“These reforms can help reduce the shadow economy and increase tax collections,” he said.
Chung, who is also an Indirect Tax & Transfer Pricing senior executive director at Grant Thornton said pushbacks to these new measures will not be surprising.
“There will be understandable reluctance to pay more taxes as well as the burden of additional compliance requirements.
“However, the introduction of any new measures or reforms can be facilitated by clear guidelines and road-maps with ample time for their implementation,” he said.
Meanwhile, in Dewan Rakyat earlier today, former prime minister Datuk Seri Ismail Sabri Yaakob had said government should reintroduce the goods and services tax (GST) to increase national coffers as it is more efficient, transparent and fair.
Ismail said this would be a better move to boost revenue rather than maintaining the current sales and service tax (SST), saying that the government’s plan to raise SST from 6% to 8% was “not the right move” as it would not generate significant revenue while burdening consumers.
Ismail Sabri also pointed out that when GST was abolished in 2018, the country lost approximately RM20bil to RM30bil annually due to the “black economy”.
