Modernising Malaysia's tax system for a digital economy

The New Straits Times has reported that the Malaysian government is considering studying the potential integration of certain Goods and Services Tax (GST) features into the existing Sales and Service Tax (SST) framework. This move is seen as a step towards modernising Malaysia's tax system in light of the country's digital economy.

The proposed study should not only focus on choosing between GST and SST, but also consider how consumption tax rules apply to digital transactions, gig economy activities, crypto-asset transactions, and emerging business models. The government should first assess the existing SST framework, examining revenue, tax cascading, consumer prices, business compliance costs, and the treatment of digital transactions.

This assessment will help determine if further reform is necessary, what problems it should address, and how success should be measured. If issues remain, the study should explain what it means to add GST features to SST, as a hybrid system might lead to administration, implementation, and enforcement issues, increased tax evasion, compliance burdens, market distortions, and potential economic decline.

The law must clearly define what is taxed, who must collect it, and how it is collected and paid to the government. If GST features like input tax credits and refunds are incorporated into SST, passing a law is not enough; the Customs department must have trained officers, clear procedures, reliable data, and computer systems to verify credit and refund claims and conduct audits.

The study should also include meaningful public consultation, with input from consumer groups, small businesses, digital platforms, tax professionals, and administration officers. Any changes should be tested and given sufficient time for businesses to prepare. Finally, any reforms must adhere to internationally recognised tax principles developed through the Organisation for Economic Co-operation and Development.

Brief written by urgent.news from New Straits Times's own syndicated text. Machine-written — may contain errors; check the original before relying on it.