Malaysia's Consumption Tax Revenue to Be Half Previous Level: Finmin

Malaysia will see wider fiscal deficits and slower economic growth than earlier forecast for this year and through 2020, the government said on Thursday, underscoring the challenges facing Prime Minister Mahathir Mohamad's administration. (Reuters Photo/Thomas White)

By : Joseph Sipalan | on 9:00 AM August 31, 2018
Category : International, SE Asia

Kuala Lumpur. Malaysia's new tax on some goods and services, which takes effect on Saturday (01/09), is expected to collect less than half the revenue raised by a broader one imposed by the former government, the finance minister said on Thursday.

In early August, Prime Minister Mahathir Mohamad's government repealed the unpopular 6 percent goods and services tax (GST) that took effect in April 2015. Mahathir had promised to scrap GST if his coalition won the May general election.

In place of GST, the government is reintroducing a Sales and Services Tax (SST) that was in place years ago.

Under SST, a tax of between 5 and 10 percent will be imposed on the sale of some goods, while some services will be assessed at 6 percent.

While the percentage charged on goods appears to be higher than under the old system, a total of 5,443 items have been declared exempt, compared with 544 items under GST.

Finance Minister Lim Guan Eng told reporters that due to the big increase in exemptions, SST was projected to raise 21 billion ringgit ($5.1 billion) for the government in 2019, compared to 44 billion ringgit ($10.7 billion) by GST last year.

"So this means we have returned 23 billion ringgit to the people," Lim said.

The minister said the new tax regime should not lead to higher prices, although "some inflation" was likely.

"If there is an increase (in prices), it would likely be due to profiteering by businesses," Lim said.

Headline inflation slowed to 1.3 percent in the second quarter and was expected to moderate throughout the year, Malaysia's central bank has said.

High costs of living angered voters, who delivered a shock defeat for then-Prime Minister Najib Razak in the May election.

The new government has alleged that the Najib administration misused the funds raised through GST to finance crony projects and help cover up a multi-billion dollar scandal at a state fund.


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