Najib: GST needs to be reinstated as soon as Malaysia recovers from pandemic

KUALA LUMPUR : Pekan MP Datuk Seri Najib Razak said the Goods and Services Tax (GST) must be reinstated as soon as Malaysia recovers from the impact of the Covid-19 pandemic, in order for the country to address income inequalities, attract foreign investment and to strengthen the government’s finances.

During the debate on the 12th Malaysia Plan in Parliament, he said the perception that the consumption tax was the main factor behind the rise in the price of goods is untrue, with the former premier claiming that the price of basic necessities had increased when the tax was replaced by the Sales and Services Tax (SST) during Pakatan Harapan’s time in government.

“The reality is that GST contributes to the government’s finances, and the remainder of the government’s income is returned to the people, especially for the B40 and M40.

Najib: GST needs to be reinstated as soon as Malaysia recovers from pandemic


“GST is a consumption tax. The more you spend, the more GST you pay. The rich that spend more would pay more GST,” he said.

Moreover, he said the reinstatement of the GST will open up space for the government to cut the corporate tax rate.

He said Malaysia had the second-lowest corporate tax rate in ASEAN in 2008 at 28%, after Singapore’s 17%, although Malaysia has since become the country with the highest rate in the region in 2020.

Najib noted that the current corporate tax rate of 24% is even higher than the 21% rate in the US.

“Among the considerations taken by foreign investors before picking their choice investment destination are the size of the domestic market, the infrastructure of the country, and the corporate tax rate,” he said.

While Malaysia has good infrastructure, he pointed out that it has a small domestic market and a high corporate tax rate.

Due to this, he said that even companies in Malaysia may prefer to invest in neighbouring countries rather than in Malaysia.

“This is why the GST must be reinstated as soon as possible after the country recovers from Covid-19, in order to narrow the income gap, attract foreign investment and strengthen the government’s finances,” said Najib.

During the time of the Pakatan Harapan government, there were issues relating to unpaid GST refunds, with then finance minister Lim Guan Eng claiming that the Barisan Nasional government had failed to return RM19.4 billion to over 120,000 companies for April 2015 to May 2018.

However, the Public Accounts Committee found that only RM1.5 billion of GST refunds were due as at May 31, 2018.

Meanwhile, RM9.6 billion worth of refunds was in review, whereas RM3.9 billion were related to issues of non-taxable supplies, RM900 million related to exemption issues, and RM3.5 billion still under investigation.

As at Feb 28, 2019, a total of RM4 billion in GST claims had been paid involving 54,603 accounts registered with the Royal Malaysian Customs, which were made after the government received RM8 billion — the first tranche of the RM30 billion special dividend — from Petroliam Nasional Bhd.

The GST, originally enforced on April 1, 2015 at a rate of 6%, was replaced by the sales and service tax on Sept 1, 2018, as abolishing the GST was one of the 10 main election pledges by the Pakatan Harapan coalition during the 14th general election.

By : Ahmad Naqib Idris – THE EDGE MARKETS

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