4% VAT can replace GST

THE abolishment of GST would result in a shortfall of RM20 billion. In the short term, we can count on crude oil price increases to fill the shortfall. As our country is a net exporter of crude oil, we can count on this but for how long?
To be a developed nation by 2020 we need to upgrade human capital and infrastructure to assist the advancement of industries in generating outputs that could add sufficient values to our economy. All these activities require huge capital outlay. Can our government rely on sales and services tax (SST) to achieve this vision?
The new government has to honour all its pledges. GST has to go but it shouldn't be abolished hastily on June 1, while SST may only be implemented in two to three months' time. The tax holiday would easily cost the government RM10 billion in revenue, which can be used to reduce the national debt.
If the abolition of GST is carried out on Aug 1, the government would have more time to think of a better way to honour its pledge and implement a more effective tax regime. Replace GST with value added tax (VAT) at a lower rate, say 4% instead of 6%. By doing so, it may be able to collect around RM30 billion instead of about RM20 billion via SST.
The introduction of VAT would then allow the GST system to continue, except it has to change its rate from 6% to 4% and, perhaps, the name. The implementation of GST was not only a huge task but also costly. If the aim is to reduce people's financial burden, why should we abandon an efficient tax system?
Patrick Teh
Ipoh