24/12/2025

WEDNESDAY | DEC 24, 2025

3 GST revival risks hurting rakyat again, warns economist

Growing debate over reinstating tax PETALING JAYA: Bringing back GST could help close Malaysia’s fiscal gap but tax experts warn that strong political will would be essential to navigate potential public backlash. Putra Business School Associate Prof Dr Ida Md Yasin said GST would be a sensible and fair approach, widely used in nearly 100 countries. “GST is fairer because it is applied broadly across goods and services. In this context, ‘equitable’ means almost all goods and services are taxed at a standard rate, with exemptions for certain items determined by the government.” She added that essential items such as rice, chicken and other basic necessities can be zero-rated or exempted, shielding lower income households from direct taxation. “Under SST, the government specifies which goods and services are taxed, leaving many items outside the tax net. That is why GST is generally regarded as fairer.” On the impact for poorer households, she emphasised that exemptions for essentials would protect vulnerable groups. “The government would list certain goods and services as basic necessities. These items would be zero-rated, meaning they are not taxed. Lower income groups then would not be directly affected by GST on essential items.” Ida also pointed to Malaysia’s fiscal situation, with expenditures exceeding income, as a key reason for reconsidering GST. “The government must explore ways to increase revenue and reduce the fiscal gap. GST is one possible solution. “Malaysia has implemented GST before, but it was later reversed. Moving forward, political courage will be necessary if the government decides to shift from SST to GST.” From a tax administration perspective, KPMG Malaysia Head of Tax Soh Lian Seng said GST offers greater transparency than SST and helps reduce cascading through its value-chain credit mechanism. “SST can result in embedded taxes that are less visible and may increase costs within the supply chain.” Soh added that lessons from past implementation would be critical if GST were reintroduced. “Key focus areas should include timely and predictable refunds, clear and stable rules, strong digital systems and adequate support for SMEs. Any future implementation must balance revenue sustainability with ease of compliance and business confidence.” Singapore Institute of International Affairs senior fellow Dr Oh Ei Sun said the push for GST may reflect shifting public sentiment. “GST was viewed as cumbersome and exorbitant. However, the various taxes and subsidy cuts by the current government are seen by many as even more inconvenient and heavier.” He said the public may now view a return to GST more favourably. Oh also said some observers believe GST could return in the future under a new name. – By Harith Kamal

Ű BY HARITH KAMAL newsdesk@thesundaily.com

SST is a sterile argument rooted in 1970s tax theory. It ignores newer alternatives better suited to 21st century economies driven by e payments and e-commerce.” Zahid had said BN would push for GST’s reinstatement after GE16, claiming it ensures fairness and strengthens national revenue, pointing to its global adoption. But Williams warned Malaysia’s own GST experience from 2015 to 2018 proved the tax disproportionately burdened the rakyat while failing to fix structural fiscal problems. “Companies like GST because they don’t pay it themselves – they reclaim it and pass the final bill to consumers. “Political support often comes from business pressure and the perception that it generates higher revenue. But this higher revenue is not free money. It is raised at the rakyat ’s expense.” He said GST, introduced to finance rising government deficits and debt, did not achieve its purpose. “It did nothing to cut debt or deficit. Instead, it fueled higher spending, plagued by wastage, leakages and corruption.” He added that GST pushed up prices, raising the cost of living. “It is a regressive tax, hitting poorer households hardest, especially when low-income groups already struggle with stagnant wages and rising costs. That’s why it sparked widespread public discontent.” While proponents argue GST is more efficient, Williams cautioned that global GST rates are often much higher than the 6% Malaysians experienced. “Around the world, GST is typically double digits, often 20% to 30%. That is when it really hurts low income groups.” On revenue, he challenged claims that GST is superior to SST. While GST raised more money, it applied to a wider base – 76% of products and services versus 41% under SST. Under the current Unity government, SST has delivered steady revenue growth, projected at RM60 billion in 2026, up from RM53.4 billion this year. Fiscal pressures have eased through subsidy rationalisation and anti corruption measures, saving at least RM15.5 billion annually. “This shows there’s no urgency for tax changes when efficiency savings are prioritised. Rather than revisiting GST, policymakers should explore taxes aligned with the digital economy. “It is time to move beyond the SST versus GST debate and focus on practical, modern options,” he said, highlighting an e-payments tax. “A 1% tax on electronic payments including card swipes, QR payments, e-wallets and online transactions could raise RM28.8 billion without anyone even noticing. “That’s a far better yield than either GST or SST at the same rate.”

o Critic says debate ignores modern tax options and Malaysia’s experience

PETALING JAYA: Reintroducing the Goods and Services Tax (GST) after the 16th General Election (GE16) would be “a terrible policy” that risks repeating past mistakes and further burdening ordinary Malaysians, economist Prof Dr Geoffrey Williams has warned.

Tax (SST). He said the renewed debate shows outdated thinking, ignoring how modern economies operate. “This debate between GST and

Williams was responding to Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi who called GST the “best tax regime” and fairer than the current Sales and Services

Fomca cautions against hasty return of broad-based consumption tax PETALING JAYA: Malaysia’s consumer watchdog has cautioned that

return at its old 6% rate. “A lower GST rate could be fairer and more sensitive to consumers, especially if essential goods are zero-rated and vulnerable groups are protected. “The government must also be transparent about how revenue is used, enforce rules against profiteering and ensure any extra money benefits consumers directly.” Saravanan emphasised that without proper safeguards and enforcement, simply changing the tax system will not ease the cost-of-living burden. – By Harith Kamal

when previously implemented, was more transparent than SST, as it was clearly shown on receipts, allowing consumers to see exactly how much tax they were paying. “SST, on the other hand, is often hidden earlier in the supply chain, making it harder for consumers to distinguish legitimate tax increases from unfair mark-ups. “If GST is reconsidered, it must come with real protections for essential items and stronger enforcement to prevent abuse.” Saravanan said GST does not need to

impact assessment. “Taxes directly affect the Consumer Price Index (CPI) and without strong controls, GST could again lead to higher prices as businesses pass costs to consumers.” Saravanan said while the current SST is narrower than GST, it has done little to ease the burden of cost-of-living. “Consumers continue to face rising prices for goods and services, largely because businesses pass on costs along the supply chain. Price increases tend to go up and rarely come down.” Fomca also highlighted that GST,

reintroducing GST without careful planning, safeguards and public consultation could backfire, hurting households and eroding trust in the government. Fomca CEO Saravanan Thambirajah said the GST framework is structurally sound, but any attempt to bring it back must be gradual, transparent and backed by strong protections. “Fomca does not support reverting to or implementing GST without proper planning, stakeholder engagement and