According to Maybank Investment Bank (Maybank IB) Research, the Ministry of Finance has set up a committee to study various revenue-enhancing measures for the nation. This includes the possibility of reintroducing the goods and services tax (GST).
In a dialogue with the research house last week, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz was quoted as referring to quite a number of these revenue-enhancing measures. These included analysing weaknesses in the tax regime and impact of new taxation on the economy, studying options for new taxes like carbon tax and digital tax, rationalising tax incentives, improving tax administration, and enhancing tax audit – by implementing tax identification numbers and enhancing data analytics.
Earlier this month, Prime Minister Tan Sri Muhyiddin Yassin had also alluded to the need to study the reintroduction of GST, saying that the government would be meticulous in assessing the effectiveness of GST in comparison to the sales and service tax (SST) system currently in force.
“Timing is also important – especially on any new taxes – so as not to disrupt the economic recovery process,” said Tengku Zafrul, adding that 2021 is a transition year from crisis to recovery. He stated that over the medium term, the government is committed to lowering the budget deficit to 4% of gross domestic product (GDP) by 2023.
“The key strategy will be on revenue enhancing given the limited scope to cut spending, such as 95% of operating expenditure are ‘locked-in’ obligations, like emoluments, debt service charges, and retirement charges,” the finance minister was quoted as saying.
Tengku Zafrul also addressed the decision not to impose a windfall tax on glove manufacturers to avoid potential “opportunity costs or losses” – such as glove manufacturing companies investing overseas instead of in Malaysia. This would be sending the wrong signal to existing and potential investors in other industries, Tengku Zafrul said.
As it stands, the glove manufacturers’ corporate income tax is projected at record levels in the near future, at RM2.8 billion in 2020 and RM4.7 billion in 2021, driven by the supernormal profits arising from a continued spike in demand for gloves during the Covid-19 pandemic.
(Source: Malay Mail)