KUALA LUMPUR: Tax experts and industry players have proposed that the government should consider combining the best of the Goods and Services Tax (GST) Act and the existing Sales and Services Tax (SST) Act, and be called the Harmonised Sales and Services Tax (HSST) Act to improve the current consumption tax system in the country.
Former director-general of the Customs Department who is also the former chairman of the Customs Oversight Committee until April 2020 at the Ministry of Finance (MoF), Datuk Seri Subromaniam Tholasy said although the GST is the most ideal consumption tax, the government has said it would only be reintroduced after careful consideration.
“So the current SST needs to be improved by merging both sales tax and services tax into possibly one harmonised rate in order for the government to collect more revenue,” he said in the ‘Harmonising Sales and Services Taxes: The Better Alternative to Reintroducting GST’ economic chat session organised virtually by the Malaysian Institute of Economic Research (MIER) on Friday.
He said that under the current SST, there are about 800 items (goods) which attract five per cent sales tax and 5,600 more items attract 10 per cent, while under GST it used to tax over 11,000 items.
“The government can increase or broaden the base of items (goods) under the SST to about 8,000 items and still keep it at a single-stage tax, which is the sales tax. While for services tax, which currently accounts for 37 per cent, there is also a potential to be broadened to mirror the image of GST, which is 65 per cent.
“This will have less impact on consumer price index (CPI) prices because when we look at the CPI basket, one of the main issues under GST was that typically the goods have shown a dramatic increase,” said Subromaniam.
Under SST, the single most important weakness is the cascading of taxes.
Another panelist, Dr Veerinderjeet Singh, a member of the Global Tax Commission of the International Chamber of Commerce (ICC) pointed out that it is an inaccurate perception to say that the implementation of GST will increase government revenue because it covers about 70 per cent of goods and services, while the SST only covers about 37 per cent.
“I have been a proponent for GST and still am, but I want to clarify that if we widen the scope of coverage in SST, we can also collect more revenue. But how much more, I suggest that the authorities and relevant parties do a simulation (to study the matter),” said Veerinderjeet, who is also the vice-chairman of the ICC’s Global Tax Commission.
He supported the idea of extending SST to cover more goods and services. However, there would be concern on inflation as prices of other goods would go up due to the imposition of a six or 10 per cent tax, he added.
“But I think this can be done skillfully over a period of time. Another issue is that enforcement needs to be effective where the investment into manpower needs to be looked at.
“Besides, the usage of technology is fundamental for enforcement to give a greater control mechanism and probably should be introduced in the intermediary model.
“Adding to this, I think it is also time to go back to invoicing and stating companies’ SST (registration) number on the invoices like how we used to do in GST, as this should create transparency as well,” said Veerinderjeet.
Board member of MIER and former Federation of Malaysian Manufacturers (FMM) president Tan Sri Yong Poh Kon who agreed on the matter said by having a number (registration), it would help to solve problems faced by manufacturers and service providers as you will not be charging each other taxes.
“Although there will be a loss of revenue because the tax on tax is gone and the government will lose its first bite (on revenue), it is not a complete loss. This is because the cost of services is built into the manufacturers’ products in the end.
“Instead of losing six per cent, it would only lose one per cent or so. I think we can work this out in simulation. I believe improving the current model can make SST better, more effective and simpler to businesses and the government,” he added. — BERNAMA
