Malaysia’s tax collection among the lowest in the region

KUALA LUMPUR: Malaysia is one of the lowest tax revenue collectors in Southeast Asia, with a tax-to-gross domestic product (GDP) ratio of 11.8 per cent.

Malaysia University Science and Technology (MUST) economist Prof Emeritus Dr Barjoyai Bardai said Malaysia fell behind Singapore and Thailand and is struggling to catch up. Both use the goods and services (GST) and value-added (VAT) taxation system.

"We are far behind due to neighbouring countries using GST. Recently, for example, Singapore has increased the tax rate, so our tax collection is even much lower.

"Malaysia collected RM40 billion using the GST. Now, with the sales and services tax (SST), we collect less than RM30 billion, and the revenue from the service sector is less than half," he told Bernama.

Barjoyai said overall, the SST collection is only about 15 per cent of the total tax collection.

PwC Malaysia Indirect Tax Leader Raja Kumaran shared similar views, noting that the government will not be able to expand its tax contribution to GDP if the tax system is not fully extended across the supply chain.

Raja said the Finance Ministry had estimated an additional RM3 billion in revenue next year by raising the SST rate to 8.0 per cent from 6.0 per cent, effective March 1, 2024.

The new rate excludes services such as food and beverages, telecommunication, parking and logistics, but the scope of taxable services has been expanded to include brokerage, underwriting and karaoke, Prime Minister Datuk Seri Anwar Ibrahim said when presenting Budget 2024 last year.

He suggested that Malaysia tax health services, private education, rented commercial property and infrastructure to expand the scope of the tax, thereby widening its revenue.

"I think we are moving more towards reliable consumption tax, and we hope that as the economy moves up, the contribution of the indirect tax will increase. But to have a good tax distribution system, we need to have effective infrastructure, good enforcement and clear communication and transparency to the investors," he had said.

In total, the federal government has projected its revenue collection in 2024 to grow 1.5 per cent to RM307.6 billion, driven by higher tax collection.

-- BERNAMA

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