Implementation of GST will track down tax evaders

People who evade paying duties and taxes will be easily tracked down by the Royal Malaysian Customs and Inland Revenue Departments once the Goods and Services Tax (GST) is implemented.

Minister in the Prime Minister's Department Datuk Seri Idris Jala said by introducing GST, the entire record-keeping process would not only become more rigorous but also contribute to an efficient collection of taxes and duties in future.

"GST is a broad-based tax based on the amount of consumption. It is the more well-to-do and the wealthy who consume more, the GST automatically taxes them the most, not the lower-income group," he said in his blog yesterday.

Idris, who is also Chief Executive Officer of The Performance Management & Delivery Unit (PEMANDU), said the implementation of the GST can also track down the country's capital outflows as studies have shown that Malaysia has a large capital outflow which cannot be reconciled in the national accounts.

He added, as much as 80 per cent of the capital outflows was said to be from transfer pricing where firms transfer costs to various centres around the world to minimise tax.

"Once GST is implemented, it become more difficult to evade taxes because complete records are kept at every stage of the value-adding process.

"There are records of who sells to you and at what price and the same for yourself, all along the chain. It is just a matter of going down the chain to see if you are playing around with your fingers," he said.

Idris added that if GST is announced in Friday's 2014 Budget, it was likely to be implemented only in 2015 as the country needed a grace period of between 12 and 18 months to prepare for the value-added tax.

Idris said it was important to remember that when the GST is implemented, Malaysians can set the tax rate at zero for any number of essential goods.

"This is what the government intends to do to ensure Malaysian citizens are not burdened by taxes on essential items.

"Furthermore, the GST will help the government gain extra revenue because we expect more and more people to become affluent as measures to increase income becomes a reality.

"As consumption and affluence increases, government income from GST will increase in tandem," he said. Idris also said the GST would also benefit citizens as essential goods and services like food, public transport and education are likely to be zero-rated hence consumers would not pay extra taxes.

"As government revenue increases, it will have more money to provide social safety net programmes such as the 1Malaysia People's Aid for low-income groups," he said.