MALAYSIA: After it was reported earlier this week that Malaysia was considering bringing back a consumption tax in order to bolster its finances, a spokesman for the government has gone on record to deny this.
The government news agency Bernama reported on Thursday (Aug 29) that Fahmi Fadzil, who is the Communications Minister as well as the spokesman for the unity government, said “there were never discussions” regarding reintroducing a goods and services tax (GST) as an alternative to taking away the subsidies for RON95 fuel.
On Aug 28, Bloomberg reported that the cabinet of Prime Minister Anwar Ibrahim has been mulling over bringing back GST, citing people who were familiar with the issue.
These sources, who also requested anonymity due to the private nature of the matter, however added that a decision had not yet been reached.
The report quotes them as saying that some in the government believe that imposing GST might be a smarter political choice than taking away the subsidies for RON95 fuel, given Malaysia’s status as a major oil-exporting country.
Furthermore, cheap fuel is considered to be a necessity by a majority of Malaysians.
On Aug 27, the Organisation for Economic Co-operation and Development (OECD) recommended for the government to reinstate the GST, noting that at present, the tax system only contributes 12 per cent to the economy.
Meanwhile, Malaysia’s currency is continuing its run as the best performer across emerging markets, strengthening by .2 per cent against the US dollar.
Bloomberg pointed out, however, that there are downsides to reintroducing GST, which had been brought in by ex-Prime Minister Najib Razak in 2015. The 6 per cent tax, which was later said was used to have partially covered up the 1MDB scandal, was instrumental in Razak’s removal and was repealed by his successor, Dr Mahathir Mohamad.
It was replaced in 2018 by the sales and services tax, or SST, a one-time tax under which live animals, medicines, and machinery are exempted.
However, Bernama added that Rafizi Ramli, Malaysia’s Economy Minister has said that the country is less than eager to reintroduce the GST for increasing revenues.
“There are many ways to achieve fiscal strengthening with different groups offering varying perspectives,” the news agency quotes him as saying.
Mr Rafizi added that these matters would continue to be discussed at the government level.” /TISG
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