KUALA LUMPUR: Former prime minister Najib Razak has urged the government to reinstate the goods and services tax (GST) as soon as the country recovers from the Covid-19 pandemic.
He said the tax would enable Malaysia to reduce income inequality, attract foreign investments and strengthen the government’s fiscal position.
GST could also target people in the “shadow economy”, which has an estimated turnover of RM300 billion a year, and who had previously escaped paying taxes.
GST had caused the shadow economy to shrink from 25% to 10% of the normal economy, he said.
“There was a serious leakage before the implementation of GST, which is why GST is beneficial to the nation and the people,” Najib (BN-Pekan) said during the debate on the 12th Malaysia Plan (12MP) at the Dewan Rakyat today.
He said revenue from GST could be distributed to the low-income groups, especially the bottom 40% (B40) and middle 40% (M40) groups, in the form of cash assistance which would be much greater than the amount of GST which they had paid.
As GST is a consumption tax, the more that people spent, the higher amount of tax they would pay.
The GST system was more equitable and progressive, which could provide room for the government to reduce the corporate tax and personal income tax rates.
Najib said Malaysia’s corporate tax of 24% was among the highest in Asean, compared to Singapore (17%), Thailand (20%), Indonesia (22%), and Vietnam (20%).
Corporate taxes in the United States had also been reduced to 21%.
Najib also called for a review of the 12MP as it was tabled at the end of 2021 for the 2021-2025 period.
Opposition MP Tony Pua (DAP-Damansara) said that although more than 90% of the vision and mission outlined in the 12MP was appropriate, its implementation should be refined and modified so that the country could achieve the desired goals.
He hoped that the government would review its investment policy to increase the focus on high-tech investment so as not to rely on low-skilled labour.
“Large investors such as Intel, Microsoft and Amazon cannot go to Sabah and Sarawak due to the lack of skilled workers and unsuitable ecosystem. In fact, activity in the manufacturing sector is almost non-existent and this has caused many to migrate to Peninsular Malaysia for better employment opportunities,” he said.