PUTRAJAYA, June 20 — The Goods and Services Tax (GST) is an efficient and transparent taxation system, but it is not yet suitable for re-implementation because the rakyat’s income threshold is still low, said Prime Minister Datuk Seri Anwar Ibrahim.
Anwar, who is also the finance minister, said the government did not completely reject the proposal to re-implement the GST, but the ability of low-income people must be taken into account first due to the comprehensive impact of the taxation system.
“We postponed (GST) because the people's income is still too low. My opinion at the time was that people with an income of RM2,000 were still affected although we gave some exemptions.”
“Sugar and rice are not affected, but when people buy other goods or ride the bus, indirectly, GST (is imposed) meaning it is comprehensive,” he said during the Finance Ministry’s monthly assembly here today.
Anwar said the government believes that the re-implementation of GST should only be considered when the average income of the people has increased to a more reasonable level of at least RM4,000 a month.
“Let the people's income increase first, let's say the minimum salary is RM4,000 (a month), maybe at that time we can (implement it).
“Right now, there are people earning RM1,700 or RM2,000. Maybe I was not wise in making this decision, but my intention is not to introduce taxes that will have a detrimental effect on the lower-class people, that's all,” he said.
Based on this view, Anwar said the government chose to implement a more targeted Sales and Service Tax (SST) from which the revenue would be used to increase allocations to key sectors such as education and health.
“This is our reason, we are returning the tax to the people. The allocation for the Education Ministry has increased from RM58 billion in 2024 to RM64 billion this year.
"Similarly, for the Health Ministry, we are adding RM4 billion this year, (making it) RM45 billion," he said, stressing that the government's priority now is to strengthen critical sectors and ensure transparent and effective management.
Anwar stressed that any national fiscal policy decisions, including tax implementation, must be viewed from a macro perspective and not just short-term effects.
He also acknowledged the government's weakness in terms of policy communication to the people. Thus, he called on the government to provide more active explanations about the policies implemented to avoid confusion and baseless accusations.
"I hope my friends (in the government) will please explain. Sometimes we are defensive, we just let people attack and we don't respond. Indeed, our weakness is also in explaining (policies) because we assume everyone understands," he said.
GST was first introduced in Malaysia on April 1, 2015 as part of fiscal reforms to replace SST with an initial rate of 6 per cent imposed across the board on almost all goods and services.
However, it received widespread criticism from various sections of society for allegedly burdening consumers, especially the low-income group.
The tax system was abolished on September 1, 2018 and replaced with SST.
On June 9, the government announced that it would implement a targeted review of the Sales Tax rate and expansion of the scope of the Service Tax effective July 1, in line with strengthening the country's fiscal position by increasing revenue and broadening the tax base without burdening most people.
The Sales Tax rate remains unchanged for essential goods, while a rate of either five or 10 per cent will be imposed on non-essential or discretionary goods.
— Bernama
