A rising debt burden and persistent budget deficit has forced the Government to rethink the possibility of reimplementing GST. – Bernama photo
KUCHING (Sept 27): Analysts believe the reimplementation of the goods and services tax (GST) will not likely be discussed during the tabling of the upcoming Budget 2024 given the current concerns on the cost of living.
In a report, the research team at Hong Leong Investment Bank Bhd (HLIB Research) viewed that while GST is a “necessary pain”, it reckoned the GST is unlikely to feature in Budget 2024 given cost of living concerns.
“Nevertheless, an expansion in revenue collection in 2024 is still expected via the capital gains tax (on unlisted shares) and digitalisation to enhance tax compliance (IRB is targeting 4,000 businesses with revenue of more than RM100 million for its new e-invoicing, expected in June 24),” it said.
Meanwhile, RHB Investment Bank Bhd’s research team (RHB IB) pointed out that GST is also a more efficient taxation system, helping to minimise tax leakages by way of greater transparency at all stages of the supply chain.
“In our opinion, GST has a high probability of making a comeback in the medium term, although its reintroduction in Budget 2024 looks unlikely,” it said.
It noted that the earlier iteration of GST was implemented at a six per cent rate in Apr 2015 before being removed in June 2018.
There was also widespread dissatisfaction – especially from smaller businesses – on the way GST was managed and, in particular, the refunds of input taxes due, which reportedly saw inordinate delays.
This led to the politicisation of GST in the run up to GE14 and initiative to abolish GST being the first promise in the Pakatan Harapan GE14 Election Manifesto.
“Nonetheless, a rising debt burden and persistent budget deficit has forced the Government into a rethink.
“12MP targets to bring the fiscal deficit to three to 3.5 per cent of GDP must surely come with a plan to broaden the tax base,” it said.
For the upcoming Budget 2024, RHB IB believed that there could be more clarity on the implementation of the sugar tax on premix preparations (proposed in Budget 2022) and luxury tax (announced in the revised Budget 2023 this year) in lieu of the reimplementation of GST.