“Taxes are what we pay for civilised society, for modernity and for prosperity. The wealthy pay more because they have benefitted more,”
– American historian and journalist, Jill Lepors
IN a move to bolster the nation’s financial resilience and mitigate its budget deficit, the Malaysian government has implemented a significant change this month, raising the sales and service tax (SST) from six per cent to eight per cent.
This adjustment, while aimed at enhancing government revenue, has sparked discussion regarding its implications for consumers and the economy at large.
The hike in SST inevitably translates to higher costs for consumers across various taxable services.
While certain sectors such as food and beverages, telecommunications, and parking remain exempt from the increase, the broader impact on everyday expenses cannot be overlooked.
The Ministry of Finance has reassured the public that the modest two per cent increment is unlikely to precipitate sharp price hikes that could destabilise the economy.
Nevertheless, the reality remains that consumers will feel the pinch in their wallets as they navigate these changes.
Proponents of the SST hike argue that it is a necessary step in addressing the country’s fiscal challenges, with projections indicating an additional RM3 billion in government revenue.
The decision to raise the SST rate was a strategic component of Budget 2024, aligning with broader efforts to fortify Malaysia’s economic foundation and reduce the budget deficit.
However, critics contend that despite this increase, Malaysia’s tax collection as a percentage of GDP still lags behind its regional counterparts, highlighting the need for further reform and revenue-generating measures.
The implications of these fiscal adjustments extend beyond mere numbers and statistics.
For many Malaysians, especially those earning minimum wage, the heightened cost of living poses a significant burden.
As prices inch upwards, individuals and families find themselves grappling with the challenge of stretching their budgets to meet basic needs.
Economic experts pointed out that consumers need to be even more prudent in their spending and limit unnecessary expenses with the hike of the SST.
Those most affected would be consumers who often eat out at restaurants and indulge in other types of retail spending.
Even though the increase in SST does not apply to items such as food and beverages, the price increase could happen when they include non-food costs like logistics into the food items.
Logistics companies are now subjected to a 6 per cent tax and they may opt to raise prices to transfer the additional expense to consumers.
At the same time, economic experts believe that the SST hike would be relatively manageable as the average family would face an estimated 0.3 per cent increase in their household expenditure.
This is considering how the Department of Statistics Malaysia 2022 Household Expenditure Survey stated that the service tax hike means an increase of approximately RM9, RM19 or RM30 monthly in household expenditure for the B40, M40 and T20 expenditure groups.
Despite the different views of economy experts on the hike in SST, the reality underscores the importance of policymakers considering the welfare of all citizens, particularly the most vulnerable, when formulating tax policies and economic strategies.
Moreover, the impact of the SST increase reverberates through the realm of e-commerce, where online shoppers are not immune to the changes.
Platforms like Lazada and Shopee have swiftly adapted to the new tax regime, incorporating additional charges such as Shipping Fee SST into their transaction processes.
As consumers navigate these adjustments, there is a growing recognition of the need for vigilance and prudence in managing one’s finances amid evolving economic conditions.
In confronting these challenges, it is imperative for both government stakeholders and individuals to remain informed and engaged.
Heightened awareness of economic changes empowers citizens to advocate for policies that prioritise stability and fairness, ensuring that the burdens of fiscal adjustments are equitably distributed.
While immediate solutions may elude us, fostering dialogue and advocating for systemic change represent crucial steps towards addressing issues of inequality and economic hardship.
As Malaysians adapt to the realities of an increased SST rate, it is essential to foster a collective commitment to navigating these challenges with resilience and solidarity.
By fostering a culture of economic literacy and civic engagement, we can work towards a future where fiscal policies serve the interests of all citizens, fostering prosperity and opportunity for generations to come.
While the SST hike may present short-term challenges, it also provides an opportunity for reflection and collective action towards building a more equitable and sustainable economic future for Malaysia.
