PUTRAJAYA: Several tax experts believe that the government should tweak the sales and services tax (SST) in stages to ensure a smooth transition back into goods and services tax (GST).
Tan Eng Yew of Deloitte Malaysia said the present economic environment might not be conducive for a quick switch of tax systems.
“Now is not the right time. People already have the knowledge of GST, so do it gradually,” he said, adding that there could be a hybrid tax system of GST and SST.
Tan was speaking on the sidelines of the Second Malaysia Tax Policy Forum, organised by the International Strategy Institute, here today.
He said that even when SST was replaced with GST in 2018, the government had made several changes to ensure its effectiveness and suitability for the needs then.
On the 6% GST rate charged previously when it was introduced in 2015, he said if GST was implemented again, it should be allowed to be raised or lowered according to the economic situation.
During a question-and-answer session, tax specialist Veerinderjeet Singh said GST was not a silver bullet that could generate a lot of revenue. He said it was about efficiency.
“The checks and balances in GST refunds and the input and output of taxes forced people to register. That is the strength of GST,” he said, adding that businesses under the radar had been forced to surface to pay taxes.
“They had to join the system, otherwise their customers might not buy from them as they did not have GST numbers,” he said.
GST would also promote trust, as it was transparent.
He said under SST, all companies should gradually start to register, and any weaknesses could be rectified.
“We can slowly fix it. A lot of it is about legal definitions and the ability to enforce it. If we can solve it, we can still generate income.
“Tweak it (SST) and ultimately, move to GST as it improves compliance,” he said.
GST versus SST
Thenesh Kannaa of TraTax told the forum that more companies had registered under the GST system.
He said, however, there were concerns that new companies might not register under the SST system.
There were also fears that several sectors involved in construction, including developers, might not register under the SST system, he said, adding that others could be entertainment outlets, including cinemas.
He said more clarity was also needed for companies providing IT services as well as management fees and imported items under the SST system.
BDO Malaysia executive director David Lim said GST was transparent and could build trust.
“You can see exactly how much tax you are paying. SST may not show due to the hidden tax,” he said.
He said SST might have a lower compliance level as people might not know if they were taxable.
“With GST, most will assume that they have to pay unless there are exceptions. We should aim for a system that is fair to all.”
On the rate for GST, most of the forum speakers said it should be “5% to 6% to make it more meaningful as 3% to 4% will only help the government to break even”.
KPMG Malaysia executive director Ng Sie Lynn said GST forms were easier to fill in compared with SST, which are divided into different schedules.
“Businesses need to know which schedule to go for,” she said.
However, she felt that if the government switches back to GST, it needs to ensure that businesses get their GST returns on time.
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