Gst Fetched Three Times More Than Sst Says Bank

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GST contributed an average of RM42 billion a year in 2016-17, says MIDF Amanah Investment Bank.KUALA LUMPUR: The federal government could reevaluate past implementation of the goods and services tax and reflect on how the consumption tax could be implemented better, considering all the possible advantages of the GST over other tax regimes, said MIDF Amanah Investment Bank.
The bank said communication on the GST implementation is pivotal as it will involve the people and the government should provide more clarifications by highlighting the possible impact in the short term and its strategies to alleviate them.
“GST reimbursement, which was an issue in the past, must be managed efficiently as any delay is unfavourable to business cash flows where the cost of doing business could be affected,” it said.
Besides that, some adjustments could be made after carrying out a cost-benefit analysis such as on the taxable threshold and GST rates, it added.
The investment bank said there had been talk recently about the reinstatement of GST during the Covid-19 crisis; the tax could raise the government’s ability to overcome the economic downturn with existing revenue schemes and without relying on additional national debt.
While GST continued to spread across the world and become a major source of revenue for governments, Malaysia, Myanmar and Brunei in Asean do not implement GST.
The bank said GST, imposed from April 15, 2015, had contributed RM27 billion to the government’s fiscal revenue for 2015. Collections rose to RM41.2 billion in 2016, which more than offset the continued decline of RM3.1 billion in petroleum income.
For 2016 and 2017, GST contributed a cumulative RM85.5 billion, while total cumulative revenue from petroleum-related income was only at RM10.9 billion in that period, the bank said.
GST contributed RM42.7 billion per year on average or nearly 20% of annual revenue.
In contrast, the combined collection of sales and services tax accounted for 7.6% of government revenue in 2005-2014.
The suspension of GST coupled with a tax holiday had pushed consumer sentiment up to its optimistic level in 2018. Consumer sentiment took a hit after SST was implemented on Sept 1 that year and fell to a record low of 51.1 points in the first quarter of 2020 because of the Covid-19 pandemic.
Reinstatement of GST could deteriorate consumer sentiment if the tax regime was not conveyed clearly to the public, it said. The authorities needed to keep tabs on price movement after the imposition.
The bank said among GST’s positive attributes was that it could minimise the tax cascading effect which is more prevalent under SST and also remove inflationary prices.
Therefore, given the same tax rates, consumers would pay less under GST compared to SST as they save payment on hidden tax. At the same time, it said the government could avoid any loss in tax not being collected as the collection system is more comprehensive.
“Despite the sensitivity and controversy with the implementation of GST in the past, we could at least conclude that the positive impacts had helped to improve the government’s fiscal position,” it added. - FMT

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