The question is not GST or SST
KUALA LUMPUR: The government’s willingness to study whether certain features of the goods and services tax (GST) could be incorporated into the existing sales and service tax (SST) is a useful starting point. As no hybrid model has yet been developed, it is too early to determine whether combining GST and SST elements would make Malaysia’s tax system more progressive and efficient.
The Malaysian government's exploration of integrating certain elements of the GST into the existing SST framework represents an important step towards modernizing the country's tax system. However, the proposed study should adopt a broader scope beyond merely selecting between GST and SST. It should also examine how consumption tax rules affect digital trading, the gig economy, crypto transactions, and emerging business models.
Instead of hastily implementing a hybrid model, the government should first assess the current SST framework to identify any limitations arising from the law, administration, and implementation. This would help determine if further reform is necessary and address specific problems such as revenue generation, tax cascading, consumer prices, and compliance costs related to digital transactions.
If unresolved issues persist, the study should explain the implications of adding GST features to SST, as doing so could introduce new administration, enforcement challenges, and potential tax evasion. Digital reporting tools, like e-invoicing, mainly enhance tax administration and should be evaluated separately from any potential GST elements.
The study must clearly define the boundaries of a hybrid system, outlining the criteria for taxing, collection, and payment to the government. Customs agencies would need adequately trained personnel, clear procedures, reliable data, and computer systems to process credit and refund claims and conduct audits. If GST features are incorporated into SST, a comprehensive law is required, and customs must be empowered to request necessary information from other public authorities.
In seeking to make the tax system more progressive, targeted financial assistance may be more effective than relying solely on income tax relief, as lower-income households often pay little or no income tax. The government should consider consulting relevant stakeholders, including consumer groups, small businesses, digital platforms, tax professionals, and administration officers, to ensure public confidence and minimize uncertainty during the reform process.
Ultimately, any reforms must align with internationally recognized tax principles developed by the OECD. This includes treating comparable businesses equally, ensuring the system is easy to understand and administer, fairly collecting revenue, and adapting to technological and commercial changes. By adhering to these standards, Malaysia can maintain social welfare, foster innovation, instill trust, and protect the community's well-being.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
