NST Leader: GST, SST integration?

The Malaysian government's openness to exploring a blend of the strengths of the Goods and Services Tax (GST) and Sales and Service Tax (SST) is a logical and practical move, according to the New Straits Times. This approach doesn't imply a simple return to GST, but rather seeks to incorporate certain features of GST into the current SST system, with the goal of creating a more equitable and effective taxation structure.

The idea is met with approval, as it moves away from labeling tax policies based on political affiliations or past implementations.

The crux of the discussion should be on finding a tax system that allows the government to generate adequate and consistent revenue while safeguarding households, especially lower-income Malaysians. Openness and transparency are vital in this process. If the government decides to proceed, it must clearly outline what is being considered, justify its necessity, and explain its potential impact on households.

The previous GST experience serves as a reminder of how swiftly a tax reform can lose public trust when communication is inadequate. Good communication extends beyond official statements or speeches. It means learning from the shortcomings of the GST, such as refund delays, compliance costs, and the public's perception that it leads to price hikes, and integrating what works from the SST.

There are indeed shortcomings in both tax systems. For instance, the Customs Department has extended the SST for services rendered at elderly care homes, leading to additional charges that disproportionately affect low-to-middle-income households. This comes at a time when the cost of living is a major crisis. It's concerning that such taxes are being imposed when the middle-income group is sliding into the low-income bracket due to the cost of living crisis.

However, this doesn't mean that SST is entirely flawed. It has advantages, particularly its simplicity for consumers.

While simplifying the tax system is a priority, it shouldn't be the sole objective of tax reform. The reform must also consider the cost of living, business competitiveness, investment, and income distribution. Most importantly, fiscal sustainability shouldn't solely depend on taxes. Curbing wastage and leakage, which the auditor general's reports have estimated to be as high as RM55 billion annually, is equally crucial.

The review of the tax system should be seen as an opportunity to simplify it, rather than an excuse to create an even more complex regime. The ideal system should be predictable, transparent, and resistant to manipulation.