Islamic Bank warns against immediate re-introduction of GST
It will be too soon to reintroduce the Goods and Services Tax (GST) in the February’s Budget 2023, as consumers and businesses will need more time to make the necessary preparations, according to Islamic Bank Malaysia.
Chief economist Firdaos Rosli said that while there is “no wrong or right time” to bring back GST, he suggested that GST is a much more robust compared with the Sales and Services Tax (SST).
“We, however, do not expect the GST to be reintroduced this year, but we do hope at the very least that they (the government) would give some clues as to where the GST might hit,” he said at the recent launch of the bank’s ‘2023 Economic Outlook: When Prices Are Entrenched’ report.
“We need the GST. Despite its flaws, it is a much more robust taxation system than the sales and service tax.
“So, the idea is not to have the perfect system, but to adopt, adapt and improve on the existing taxation system. But whether the timing is right, in my view, the timing is always not right, as there will always need to be a mindset change to what’s coming,” he said.
GST was introduced in April 2015, only to be abolished in 2018.
Rosli said the re-introduction of GST must also take into account how consumers would react as the measure would have an impact on inflation.
On the rate he said: “It would be nice to have the (GST) rate at 2%–3% so that inflation measures could be somewhat mitigated.”
Meanwhile, on the news that Malaysia’s national debt has hit RM1.5 trillion, the economist believed the government would be able to manage it in line with the country’s economic growth.
He said that despite its size, the debt would not affect Malaysia’s rating by the international rating agencies. He said: “Rating agencies do not only look at Malaysia but also at the sovereign debts of other countries which have risen because of the Covid-19 pandemic.
“However, if other countries similar to Malaysia, which has an A3 rating, record better growth rates, our country’s ratings may drop slightly,” Rosli said.
Debt must be urgently addressed
Malaysian Prime Minister Anwar Ibrahim, who is also the Finance Minister, said this week that the country’s RM1.5 trillion debt, including liabilities, needs to be addressed urgently.
He said the country’s economic position “is still not strong”, adding that it was also affected by external global factors.
Anwar also said the government will not take the ‘business-as-usual’ approach, but will instead adopt a different approach to strengthen the country’s economy.
He also said that the government will not be tied to the fiscal policies it outlined in October 2022 when it presents Budget 2023 in February.
However, he added that the recommendations made in the plan last Autumn will be taken into account in the coming Budget 2023 figures.
He told a Budget 2023 Dialogue meeting: “All aspects will not be tied to the previous Budget even if we take into account the suggestions made before. This time the Budget will be made new in its core, policies and modifications.”
The PM said priority would be given to small and medium enterprises in high-impact sectors such as technology, agriculture and renewable energy.
In a separate statement, the Finance Ministry said the Budget 2023 Dialogue was attended by government agencies, the private sector, academia, non-governmental organisations and civil societies.
At the meeting participants made various suggestions such as attention to mental health and the needs of people with disabilities, gender equality in education and employment opportunities.
Proposals to encourage small and medium enterprises, to boost urban agriculture as contributors to food security and environmental sustainability were also discussed.
The Finance Ministry also launched the Budget 2023 Proposal Portal – https://bit.ly/cadanganbelanjawan2023 – to make the annual budget preparation process more transparent and inclusive.
