New tax system won't have much impact on economy, says MIER

KUALA LUMPUR: The government’s decision to abolish the Goods and Services Tax (GST) and reinstate the Sales and Services Tax (SST) would not significantly impact the country’s economic growth, according to Malaysian Institute of Economic Research (MIER).
The think-tank maintained its gross domestic product (GDP) growth forecast at 5.5% this year. The GDP is expected to moderate between 4.8% and 5.3% next year.
“The brief period of the tax holiday and the shift to SST in September won’t have much impact on GDP as the (GST and SST) elements play a very small or insignificant role in (contributing to) GDP,” MIER executive director Dr Zakariah Abdul Rashid said at MIER's 33rd National Economic Briefing today.
“I think other factors (such as domestic demand, private and public consumptions) are more important,” he added.
Asked on the impact of SST implementation on the consumers, Zakariah said he expects some increase in prices of goods in the near-term once the tax is reinstated.
However, he said that SST is unlikely to have a huge impact on consumers compared with the GST as the former is imposed on manufacturers and not on end customers.
“The coverage (of items) between both tax regimes are also different where GST are much more widespread. So I believe that there will be a less burden on consumers,” he added.