All prices to "increase slightly" on average after GST, says Treasury sec-gen

Prices of goods will generally increase following the implementation of the Goods and Services Tax (GST) on April 1, 2015, said the government's Treasury Secretary-General today.

"Overall there will be a slight increase in prices if you put in on average," said Tan Sri Dr Mohd Irwan Serigar Abdullah, who added that an increase in inflation is expected in Malaysia, as seen in the experience of other countries such as Singapore and Australia.

"There is a small spike (but) it would taper off within one year or so," he told reporters following a townhall meeting between top officials and the media over the Auditor-General's report which was tabled on Monday.

Mohd Irwan said that this expected price hike can only be curbed by a beefed up enforcement.

"This is the worry. We don't want those speculators, retailers to take advantage of the situation and impose GST on certain goods that they are not supposed to. We want to prosecute them, bring them to court," he said.

On the proposal to exempt petrol from being taxed under the new tax regime, Mohd Irwan said that the government was still mulling over it.

"We are still studying, we are coming out with a list of goods that will exempted, and we will decide on fuel. We will be doing subsidy rationalisation, so we will look at the implication and so on. We still have April 1, 2015 to decide. So we have ample time," he said.

Mohd Irwan once again stressed that the GST was a good tax system for the country, despite criticisms from its detractors, who he said resorted to lies.

"The whole world says it is good. The private sector and accounting and tax authorities. The rating agencies like Fitch even says if we implement GST there is a possibility to upgrade us," he said.

The GST, which has been mooted since 2005, has been controversial from the start.

The government and economists say the broad-based consumption tax would be an effective and vital mechanism to help revitalise the country's economy.

However, the Opposition has exploited fears over the new tax, calling it "regressive" and a burden to the poor, as opposed to the government assertion that it is "progressive".

On May 1, an anti-GST protest rally in the capital of Kuala Lumpur had attracted tens of thousands, underscoring widespread unease over the new tax system.

The government has been engaging in an aggressive campaign to educate people on the GST, which most experts agree is still widely misunderstood.

Last month, Deputy Finance Minister Datuk Ahmad Maslan had told Parliament that GST would be imposed on 689 goods – with the price of 73 of these items to go up, while the price of 287 items will go down and 329 items will have the same price after the tax.

A more detailed list is expected in January, called a 'shopper's guide’ to help consumers gauge how much prices will change after GST.

In the ASEAN region, Malaysia is among the last three countries that have yet to introduce a tax system such as GST, the other two being Myanmar and Brunei.

Putrajaya, under the administration of Prime Minister Datuk Seri Najib Razak, has repeatedly stressed the tax system was essential to revive the country’s economy and trim the national deficit.