SPIN-OFFS: Lower direct taxes will spur investments and savings, says minister
The goods and services tax (GST), the spin-off benefits of which have been largely ignored by critics, will offer opportunities to spur more growth and investments.
“We see the introduction of GST as an opportunity to lower the rates on direct taxes,” said Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah.
He said studies have shown that lower direct taxes encourage both domestic and foreign direct investments and savings, with the surplus funds channelled into domestic capital markets.
“These spin-off benefits are, in fact, the most important opportunities that GST brings us and they have been grossly overlooked by critics,” said Ahmad Husni in his keynote
address at the Business Times Insight series on “GST: Are Malaysians Ready?”
Announced by Prime Minister Datuk Seri Najib Razak during the tabling of the 2014 Budget on October 25, the GST will come into force on April 1 2015 at a rate of six per cent.
Ahmad Husni said the government is likely to form a GST monitoring committee before year-end.
The committee, to be chaired by him, is to ensure GST's smooth implementation, with members from government agencies as well as representatives from industries and non-governmental organisations.
On the six per cent rate, Ahmad Husni said in countries where GST was introduced post-2010, the rate was 12 per cent, placing Malaysia's rate at the lowest.
"Also, most of the countries which introduced GST are those with a per capita income of less than US$1,000 (RM3,190)."
On concerns by exporters whether the GST would impact them, Ahmad Husni said it is zero-rated for all exports, unlike currently where some exports have sales and service tax embedded in a number of value-added inputs.
"The sales and service tax charged currently is not refundable. Under the GST, exporters can claim refunds on the tax paid. As such, exporters will be able to price their goods and services more competitively than before."