The International Monetary Fund (IMF) has given the thumbs up to Malaysia's ongoing fiscal reform by broadening the tax base with the implementation the Goods and Services Tax (GST) starting April 1, 2015.
Fiscal Affairs Department Adviser, Kiyoshi Nakayama, said this shift of revenue source, from natural resource and corporate income to also include the GST, was a crucial policy direction to maintain Malaysia's long-term fiscal sustainability.
In his presentation at the International Seminar on GST 2014, he said, the growth-friendly tax was less distortive for economic growth compared with income tax.
"The GST, a consumption base tax, will not burden savings and investment, however, its design also matters," he said.
He also commended Malaysia's preparation towards implementing GST, saying that the Finance Ministry and the Royal Malaysian Customs Department's communication strategies of engaging the social media were innovative.
A speaker from the University of Exeter Business School in UK, Associate Professor in Economics, Simon James, said tax on consumption, such as the GST, was likely to cause the least damage compared to other forms of tax.
The GST, known as value-added tax (VAT) in the UK, has increased revenue and improved effectiveness in the large majority of countries that had implemented it.
"It is, in fact, one of the most successful taxes in the UK. Quite remarkably, the increase of VAT rate to 20 per cent in January 2011 from 17.5 per cent previously aroused little protest and resistance as compared to many other tax changes," he said.
The one-day international seminar, organised by the Finance Ministry, gathered experts from around the world to speak on their respective countries' experiences in implementing the tax.
Bernama
Mon Sep 15 2014
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