Smaller price hike seen under SST, says finance minister

PETALING JAYA: Finance Minister Lim Guan Eng assured that any price hike under the sales and services tax (SST) will not be as high as those seen under the goods and services tax (GST) regime.
“The federal government opined that the inflation rate will be contained and the price hike will not be higher than the GST period. If there is price increase, the impact from the SST is just half of the GST,” he said when tabling the Sales Tax Bill 2018 for the second reading at the Dewan Rakyat today.
Lim attributes the expected smaller price hike and low inflation rate to lesser debt burden, lower number of goods and services taxed as well as tax registrants, better business cash flow and high annual turnover threshold.
“At the same time, the zero-rated GST which was implemented since June 1, is proven to have reduced prices of goods. The consumer price index (CPI) moderated to a 0.8% growth in June from 1.8% in May. The July and August figures, which are yet to be announced, are expected to stay at low levels.”
Lim said the government will, through the Ministry of Domestic Trade and Consumer Affairs, take precautionary measures and enforce the Price Control and Anti-Profiteering Act 2011 to prevent any parties from making excessive profits from the SST reintroduction.
He said the government expects tax collection to reduce by RM17 billion with the removal of GST and reintroduction of SST.
“In other words, this RM17 billion will be returned to the people and directly benefit them,” Lim said.
For 2019, tax collection is expected to be reduced by RM23 billion.
As the annual turnover threshold for the sales tax will be revised upward to RM500,000 from RM100,000, he said small-sized manufacturers will be exempted from the tax.
“With the higher threshold, the government estimates that only 27,456 manufacturers have to register under the sales tax against 32,725 manufacturers under the GST. Following that, a majority of manufacturers will fall out of the scope of the sales tax, which will reduce the cost of tax compliance and administration for small-sized manufacturers.”
Lim said the World Bank had forecasted that Malaysia’s gross domestic product (GDP) could expand 0.2% with the lower tax burden.
“The proposed sales tax model will also ensure that Malaysian exported goods are more competitive with several facilities given to registered manufacturers, including the tax exemption measure. With this, the government expects that it could achieve a GDP growth of 5.5% to 6% in 2018.”
He added that the government is studying other structural problems in the domestic economy, such as monopolistics practices, which exert price pressures on the people.