Gst in Malaysia

Introduction Of Goods Service Tax Gst In Malaysia

In the new global economy, more companies are operating cross border, and as such are faced with the need to deal effectively with many different taxes, often in many different countries, each with different rates, ruling and application. Coupled with this, the regulatory environment is increasingly challenging. The IMF has been trying to push for all countries to adopt the Goods Service Tax (GST), or also known in certain countries as Value Added Tax (VAT), so as to create a more level playing field amongst trading nations. Direct taxes have in the past been used to camouflage ‘protectionism’ policy of certain countries. High tariff on certain product like motorcar has prevented healthy competition amongst trading nations. The general populations of that country are left without a choice but to consume the local products, as imported products have become more expensive with the high tariff. Often, because of this, the local products tend to be inferior in quality as there is no real incentive to compete.

Other possible reasons for implementing GST are:

Presently, the average birth rate is 2.2, so it is expected that by 2030, 12% of the population will be above 60 years old, double the current number. The current 15% of the working population paying taxes will therefore reduce, putting a greater burden on a smaller group of people. GST is a broad-based tax that distributes the burden of taxation among a larger section of the population based on consumption.

GST preserve the incentive to work and encourages enterprise as it is not a progressive income tax. The tax rate does not increase according to income level; it is flat at the determined rate.

GST is levied at the production and distribution stages, thereby incorporating a self-policing mechanism that facilitates administration and makes it more difficult to avoid or evade. This further reduces the possibility of revenue loss through understatement of...