Will the Govt implement Goods and Services Tax in Budget 2011?

Wednesday September 29, 2010

By LEE KIAN SEONG
lks@thestar.com.my


Question draws mixed views from economists


KUALA LUMPUR: The question of whether the Government will announce the implementation of the Goods and Services Tax (GST) in Budget 2011 has drawn mixed views.

While some feel that it was timely for the Government to capture a wider tax base (as only about one million people pay income tax), others feel that it may just announce more details on the politically sensitive issue.

The implementation of the GST, a broad-based consumption tax that will replace the existing sales and services taxes, was scheduled for next year but it was put off due to, among various reasons, the need for more feedback.

KPMG tax partner Tan Eng Yew said the platform for GST implementation had been set; people are just waiting for the implementation date, which could be announced any time, not necessarily in the budget.

“There have been some public consultations and announcements related to the GST in the last few months but these appear to have slowed down,” Tan said, adding that there should be more public campaigns and activities being conducted if the GST was to be announced soon. “It may not be in this budget. The GST will be introduced in the medium term when the Government is confident that the public understands its implications and are ready for it,” Tan said.

Affin Investment Bank chief economist Alan Tan said: “While we do not expect a specific date to be mentioned for GST implementation in this budget, we do expect some focus on the rationale for the country’s tax reform.”

He believed that the Government would give ample time for the private sector to prepare for the GST roll-out.

An economist said it was hard to predict if the Government would announce the GST implementation in the coming budget but noted it was definitely another area that could boost revenue and help reduce the budget deficit.

“We still have to wait for the Government to decide on the best way to introduce it as a lot of people are still unfamiliar and worried about the tax structure,” she said.

An analyst from a local brokerage said the Government might announce more details on the matter but it would require 18 months to prepare for the implementation.

“However, we feel that the Government is not likely to announce the date of implementation as it is still a politically sensitive issue,” he said, adding that the public still perceived the new mechanism to mean higher taxes, a concern that should be addressed before the GST was implemented.

The implementation of the GST to replace the existing Sales and Services Tax made its maiden appearance during Budget 2005.

Subsequent budgets were quiet on the issue until the first parliamentary reading of the GST bill in December last year.

However, the second reading, which was originally scheduled for March this year, was postponed indefinitely as the Government required more feedback from the public.

Studies have indicated that the new system will help the Government collect an additional RM1bil in the first year of implementation compared with the current sales and services tax model.

Currently, about 140 countries have implemented some form of value-added taxations, or GST, while almost all Asean countries have adopted the GST except Malaysia, Brunei and Myanmar.


SOURCES : http://biz.thestar.com.my/news/story.asp?file=/2010/9/29/business/7118793&sec=business