MoF: Tax structure under review, return to GST mulled but only after MCO

The Ministry of Finance (MoF) is currently studying measures to widen Malaysia’s tax revenue base, including the reinstatement of Goods and Services Tax (GST).

A report by The Edge quoted MoF Deputy Secretary-general Zakiah Jaafar as saying that tax reforms are necessary as Malaysia currently collects only 17 percent of gross domestic product (GDP) in tax revenues, which is quite low relative to high-income nations.  

However, she also added that any changes in tax policies will only be implemented after the economy has recovered from the current Covid-19 pandemic.

“So now, we are slightly distracted in maintaining a countercyclical stance until recovery is fully entrenched despite limited fiscal room.

“We are certainly studying new tax reforms, which include reviewing the existing tax structure and the possibility of new taxes to be imposed.

“But rest assured, we are very mindful of their impact and the timing. If anything, the government would wait until the economy has fully stabilised and activities are normalised before making any major changes,” she said in a panel discussion at the launch of the World Bank’s flagship report titled “Aiming High — Navigating the Next Stage of Malaysia’s Development” today.

The 6 percent GST was introduced on 1-April 2015, replacing the previous 10 percent Sales and Services Tax (SST). However by 1-September 2018, the then-new Pakatan Harapan government had reversed the decision to abolish GST, and reintroduced SST.

Also read: Govt mulls carbon tax and return of GST

A separate report by the New Straits Times also added that the MoF is looking to curb leakages in tax collection, especially in the informal sector, which typically includes small scale online businesses like Youtubers and other social media pages.

"One of the initiatives will include tapping into the informal sector, curtailing under reporting and declaring policies, reducing tax leakage and enhancing tax administration through more effective data management and integration with relevant agencies," said Zakiah.

Currently, LHDN’s Digital Economy guidelines on taxable digital businesses include Media and Broadcasting (Youtube, photography services) and Advertising (Blogger, Instagram).

At the moment, the 10 percent SST has been reduced to 0 percent for locally-assembled passenger cars until 30-June 2021. Meanwhile, SST for imported passenger cars is reduced to 5 percent, also to end on 30-June 2021. Commercial vans and pick-up trucks, which already enjoy 0 percent excise duty, are not eligible for the SST cut.