Gst in Malaysia

A move toward GST in Malaysia

Countries all around the world are undergoing reforms in various sectors and systems that they practice, to boost and improve their economic performance which has its implications on various global interactions such as trade etc. One of the major reforms that many countries have undergone is a tax reform. Taxation has been around even as early as the 1700s in some countries e.g. Australia and was primarily imposed as a source of money for specific government projects. Various forms of tax have since been employed each one implemented to try and overcome shortfalls of the previous. Over a 100 countries now have moved to a goods and service tax and have GST/VAT as part of their tax systems; Canada, Britain, Australia, New Zealand, Singapore are to name but a few. This paper highlights the proposal of the Malaysian government, in particular, to introduce tax reform in the form of Goods and Services Tax (GST) to replace the existing Sales and Service Tax. It explains what GST is all about, and the form of GST proposed by the Government. It further goes on to discuss the advantages and disadvantages of GST and concludes by analysing the viability of its introduction in Malaysia.

What is a Goods and Services Tax

Taxpayers can be taxed in two forms: through direct taxes such as income tax and road tax or through indirect taxes such as sales and services taxes. Direct taxes tend to bring to realization to the tax payers the burden of paying tax since taxpayers are required to declare their income and pay tax accordingly. However indirect taxes use another approach, the amount of tax is already accounted for and embedded within the selling price and therefore taxpayers don’t usually realize they are being taxed.

Goods and Services tax (GST) is one type of indirect taxes. GST is a broad based consumption tax. Many developing and emerging economies have been transforming their tax revenue bases by progressively moving from direct taxes to...