- Malaysian Rating Corporation Bhd (MARC) suggests that Malaysia could halve its fiscal deficit by implementing a consumption tax like the Goods and Services Tax (GST).
- MARC believes that the GST is administratively efficient and can reduce tax avoidance and evasion.
- The GST would enable Malaysia to optimize its fiscal and debt position and provide a stronger revenue stream for welfare benefits.
- MARC acknowledges concerns about the regressive nature of the GST but argues that tax sufficiency is crucial for sustaining social assistance initiatives.
- Many countries, including those with lower income levels than Malaysia, have adopted the GST or a similar consumption tax model.
- The abolition of the GST in Malaysia in 2018 was seen as a populist action and had a negative impact on policy credibility and stability.
- MARC suggests targeted exemptions for essential goods and a tiered tax rate structure to alleviate the potential impact on low-income households.
- Broadening the tax base is necessary to boost investor confidence and ensure the sustainability of debt.
- Malaysia’s tax revenue-to-GDP ratio has been declining since 2013, while peer nations have seen an increase.
- Excessive spending on subsidies limits the government’s capacity to allocate funds to other critical public service areas.
- Deputy Finance Minister Steven Sim believes that there are alternative methods, such as better fiscal management and targeted subsidies, to manage fiscal needs without reintroducing the GST at this time.
Source: theedgemalaysia.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
