IDEAS calls for comprehensive study on GST before reintroduction

In a statement today, the think tank said other policy measures such as targeted subsidies and a formalised social safety net programme were also need to be in place to cushion the potential price hikes post-GST in the immediate term.

It believes that the possible reintroduction of the GST needs to be done in a timely and well-planned manner, especially when the local and global economies are still quite fragile.

"In general, GST is needed to sustainably broaden the government's revenue streams in the face of the widening budget deficit. There is room to broaden the domestic tax base to strengthen Malaysia's fiscal sustainability.

"From the GST collection, it is proven to be able to drive a higher revenue than the current Sales and Services Tax (SST) collection, and has evidently reduced Malaysia's dependency on petroleum income tax to a certain extent, which is subject to the volatility of the global oil market," it said.

Based on data from 2011 to 2020, IDEAS said around 55 per cent of the government's revenue came from direct taxes on average.

"The share of petroleum income tax was on a declining trend especially since the global oil price plunge in 2015. This decline had been offset to a certain degree by the implementation of GST from 2015 to 2017.

"When GST was introduced in 2015, it constituted about 14 per cent of the government's revenue, and this share steadily increased to 23.41 per cent in 2017. Overall, the SST contribution only made up 8.0-14 per cent of the government's revenue," it added.