KUALA LUMPUR: Finance Minister II Datuk Seri Amir Hamzah Azizan stated that there are no plans to bring back the Goods and Services Tax (GST) due to its potential burden on Malaysians in the lower-income group. “It is a form of broad-based consumption tax and therefore, it isn’t a suitable time to reintroduce it, as Malaysians, especially those with low-income, are facing cost of living challenges,” said Amir during Prime Minister Question Time (PMQT) in Parliament on Tuesday (March 5).
Amir Hamzah highlighted that even though the inflation rate for 2023 averaged 2.5%, the inflation rate for food and beverages was at 5%. “This category (food and beverages inflation) is felt most by the people. This is among the reasons why the sales and services tax (SST) was kept at 6% for food and beverages,” he added.
In response to a query about the reintroduction of GST by Datuk Syed Abu Hussin Hafiz Syed Abdul Fasal (PN-Bukit Gantang), Amir Hamzah emphasized the importance of plugging leakages through targeted subsidies and broadening the tax base to enhance the government’s fiscal space.
Amir Hamzah also noted the need for tax reforms considering Malaysia’s low tax base rate at 11.2% of its gross domestic product (GDP) compared to Singapore’s 12.6%. “Tax reforms are needed, but the government will take appropriate steps to ensure that the people are not burdened and the fiscal space remains sustainable,” he assured.
Additionally, Amir Hamzah mentioned that the government is closely monitoring the prices of goods following the implementation of new taxes starting from March 1 this year. “The government will not hesitate to take stern action if there are any traders who increased their prices errantly,” he added.
Addressing concerns about strengthening the financial position, Amir Hamzah stated that the government is open to studying taxes that could increase revenue without significant impacts. He also emphasized the importance of broadening the tax base to those who are more capable, such as the recent 2 percentage point increase in SST for electricity tariffs for commercial users consuming over 600 kilowatts an hour.
Effective March 1, 2024, the service tax in Malaysia will be revised to 8% from 6%. However, the new tax rate for services widely used by Malaysians, such as food and beverage, telecommunications, and parking, remains unchanged at 6%.
