Deputy Finance Minister I, Datuk Mohd Shahar Abdullah has commented that the government does not see a necessity to reintroduce the goods and services tax (GST) at this point in time. This is as Malaysia’s economy is enjoying a strong recovery momentum, recording a growth of 6.9% in the first half of 2022 (1H22).

“In this regard, the government is confident that the national economy will achieve a growth projection of between 5.3% and 6.3% for the year 2022,” said Datuk Mohd Shahar, adding that the country’s recovery is also underpinned by increased domestic and foreign demand, as well as a stronger labour market.

The issue of reintroducing the GST has been discussed frequently enough over the past two years. Former prime minister Tan Sri Muhyiddin Yassin first brought up the possibility of its reimplementation back in 2020, as there had been strong criticisms against the current sales and services tax (SST) model.

Fast forward to 2022, the government continues to express an interest in bringing back the GST, although the Finance Ministry also said that it is still evaluating the suitability of reimplementing it. The ministry further emphasised that the timing must be right in order to do so, and that the government will improve the GST if it is reintroduced.

Malaysia had originally utilised the SST module between the 1970s to 2014, after which it was replaced with the GST. The government subsequently reverted back to the SST in 2018.

Aside from commenting on the reimplementation of the GST, Datuk Mohd Shahar also highlighted that Budget 2023 – which is set to be tabled on 7 October 2022 – will focus on reform initiatives to improve the people’s wellbeing and to boost the country’s resilience against future shocks. Additionally, he reiterated that the national inflation level for 1H22 (2.5%) is much lower than the inflation rate in other countries due to the implementation of price control measures and government subsidies.

“Without the subsidies provided for basic goods, it is estimated that inflation would reach 11.4%,” said Datuk Mohd Shahar, adding that the expenditure for aid and subsidies was estimated to be at RM77.7 billion – much higher than the original allocation of RM31 billion provided in Budget 2022.

(Source: The Edge Markets)

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