Weak enforcement prompted GST backlash, says tax expert

In 2017, Putrajaya collected an estimated RM42 billion through GST. — Picture by Yusof Mat Isa
In 2017, Putrajaya collected an estimated RM42 billion through GST. — Picture by Yusof Mat Isa

KUALA LUMPUR, May 15 — Weak enforcement was one of the main reasons why the implementation of the Goods and Services Tax (GST) was met with resentment, which has led to its imminent revocation, said PricewaterhouseCoopers executive director Raja Kumaran.

Many businesses also increased their prices, and this arguably placed an additional burden on the public even though the materials for their products did not come under the ambit of the consumption tax, he said.

“Many quarters took advantage of the weakness in enforcement to deliberately increase prices once the GST was implemented,” Raja told Malay Mail.

He cited the case of the roti canai seller who hiked his price the moment GST was introduced although flour was zero rated.

The GST was introduced in April 2015 to address the issue of falling government revenue. In 2017, Putrajaya collected an estimated RM42 billion through GST.

The tax was, however, criticised as regressive, because the poor were seen as bearing a higher proportion of the tax vis-a-vis their income compared to the rich — a fact that was subsequently used as a major GE14 issue by Pakatan Harapan when campaigning against Barisan Nasional.

Should it be abolished, Raja said Malaysia will be the first country in the world to scrap an already implemented consumption tax.

The new government has mentioned that it would re-introduce the Sales and Service Tax (SST) in place of the GST, but has offered no further details.

Raja said in other countries, the GST, which is also known as Value Added Tax (VAT), is an efficient means to increase government revenue, but its implementation and enforcement in Malaysia have left much to be desired.

He also lamented the fact that the Royal Customs Department, which had been entrusted with the collection of the GST, had been slow to return input tax credits to businesses.

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