PM: SST improvements possible, GST ruled out

KUALA LUMPUR: Prime Minister Datuk Seri Anwar Ibrahim indicated that the government is open to making targeted adjustments to the Sales and Service Tax (SST) system to tackle instances of double taxation. However, Anwar clarified that the government will maintain the SST rather than reintroduce the Goods and Services Tax (GST).

If particular cases of double taxation arise, the government can implement amendments to the SST. The Prime Minister emphasized that he is not rigid in his economic stance, stating that the system will persist as SST, but certain improvements might be made to enhance its efficiency.

Responding to a question from Datuk Seri Dr Ronald Kiandee (PN-Beluran) about the cascading impact of the SST, Anwar addressed concerns about increased costs for businesses and consumers due to taxes imposed at various stages. He acknowledged that a similar input tax credit mechanism exists in the GST system, which could potentially alleviate such issues.

Anwar rejected the notion that the government's decision to retain the SST was politically motivated, asserting that the administration is amenable to refining the existing tax framework.

Anwar argued that the primary contention made by GST proponents—that it would generate significantly higher revenue—does not hold water. He pointed out that the SST currently contributes 2.2% of GDP, comparable to the GST's contribution of 2.2% in 2017. Therefore, there is no compelling reason to assert that introducing GST would lead to increased revenue.

Furthermore, Anwar highlighted a disparity in the number of businesses affected by the two systems. Approximately 700,000 businesses are subject to the GST, as opposed to the 130,000 businesses impacted by the SST in the current fiscal year. Although businesses have expressed concerns about double taxation during government consultations, Anwar emphasized that these issues can be resolved through targeted adjustments without the need for a complete overhaul of the taxation system.

The Prime Minister affirmed that the administration will continue to evaluate proposals aimed at enhancing the SST, all while ensuring that taxation does not impose an undue burden on the average Malaysian citizen. The GST, a multi-stage consumption tax, was introduced in April 2015 at a rate of six percent but was subsequently abolished and replaced by the SST on September 1, 2018, as per the manifesto of the then Pakatan Harapan-led administration.