GST shouldn’t be delayed, says PwC

KUALA LUMPUR (Oct 18, 2013): The challenges in dealing with the country's budget deficit will increase or worsen, potentially resulting in a further downgrade by global rating agency Fitch Ratings, if the goods and services tax (GST) is not implemented soon, warned PricewaterhouseCoopers Taxation Services Sdn Bhd (PwC) senior executive director Wan Heng Choon.

"Fitch said downgrading may continue or get worse and one of the factors they pointed to was too narrow a tax base and Fitch also said Malaysia should seriously look at GST," he told a media briefing on PwC's Budget 2014 wish list here yesterday.

"If we stand still means we fall behind. If we move forward in terms of looking at measures to address deficit, it will at least give us a chance to be no worse off," he added.

PwC has also maintained its recommendation of an initial GST rate of 6% despite comments by some economists that a 4% rate is more acceptable.

"If it (GST) is at 4%, it will be revenue neutral. The government will be collecting the same amount of money from (the existing) sales and services tax (SST). (If that is so,) why do it at all? Just keep the present taxes.

"There's no reason to put the country through GST if all you want to do is take the same amount as from the present taxes," said Wan.

PwC senior executive director Jagdev Singh said not implementing the GST means less flexibility for the government to reduce corporate taxes.

"We need more revenue sources because trying to squeeze more out of direct taxes will be difficult," he said.
He added that countries in the region are reducing or have reduced corporate taxes and Malaysia needs to do the same to remain competitive.

The GST is also expected to cover a larger base of 60,000 to 80,000 taxpayers compared with only 30,000 from the existing SST.

On excise duty for breweries, Wan reckons that revenue collected from excise duty is not significant. Rather, the government should focus on the issue of smuggling by improving enforcement by the Royal Customs Department.

A further taxation on the gaming industry would also increase cost for operators and drive the industry into the black market, resulting in loss of revenue to the government, said Wan.