KUALA LUMPUR: The Goods and Services Tax (GST) may cause a spike in consumer prices in the short term due to businesses taking advantage of the new indirect tax, but in the long term, it will benefit the country.
To temper the hike in prices, the Profiteering Act must be strictly implemented to check on businesses taking advantage of the GST, which will be implemented on April 1 next year, said Nor Zahidi Alias of Malaysian Rating Corporation Bhd.
Describing GST as a more efficient system, he said it also costs less to administer compared with other taxes as a single rate is applied to a range of goods and services.
Nor Zahidi, who is chief economist of the agency’s economic research division, said GST also provides the leeway for the government to tax people indirectly.
This means that taxes will only be borne by those who engage in specific economic activity (consumption) — the more they consume, the more they will be taxed.
“While it is often argued that a higher proportion of income from the lower-income group is used for consumption, basic items that are normally consumed by this group are either zero-rated or GST exempted.
“Therefore, the burden on the lower-income group is less than the higher-income group.”
Nor Zahidi also said GST is an important means of diversification of government revenue.
“One of the critical factors in determining sovereign rating is the degree of diversification of a country’s revenue base.”
Malaysia has been depending on oil-related revenue over the years but oil production has been declining.
“Therefore, GST provides a way for the government to generate additional revenue,” he added.
NST Online
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