[OPINION] IDEAS calls for GST-like transparency in new SST regime
The Edge Markets
June 24, 2018
The Institute for Democracy and Economic Affairs (IDEAS) urges the new Government to provide for greater transparency and fairness in implementing the new sales and services tax (SST) that will come in by September, and not just simply revert to the old SST regime.
It said this after noting the criticism of the previous SST regime, where the sales tax component of the final price paid for goods was not known to consumers, unlike the abolished goods and services tax (GST), which had improved transparency of pricing as businesses were required by law to state the amount of GST charged in any given receipt.
Hence, in a brief paper on recommendations for the new tax regime, which IDEAS has dubbed the "the reformed SST" or RSST, it urged the Government to maintain the same level of transparency as the GST regime by requiring businesses to state the amount of sales tax paid for a given product in the final receipt.
"This will require this information to be passed from the manufacturer along the supply chain to the retailer so that they can provide the information to the consumer. Businesses should not be required to report all their costs, or how much profit they are making, but since the sales tax is intended to be passed to the consumer, it is reasonable to require that the exact amount is made known to them," it said.
Such a requirement will also support the Government in enforcing fair practice among businesses once the new tax is introduced, it said.
Lessons learned from both the rocky implementation of the goods and services tax (GST) and the old SST should be taken into account in implementing the new tax system, it added.
As such, it suggested that the RSST be a single-stage tax without refunds, set at an initial standard rate of 5% for both the sales tax and service tax elements — and for different products — to reduce complexity and variability in prices.
"Even if the rate for RSST is set at 6% or higher, the amount is likely to be lower than under GST, as the tax is only applied at the initial stage," it said.
The sales tax component should only be paid at the initial stage of distribution, unlike the GST that was paid at every stage of the process, it said. "Businesses were able to offset GST paid on inputs against GST received. However, this led to a complex, burdensome and time consuming process for filing refunds," it noted.
By returning to single-stage taxation, businesses won't be required to file any refunds and their payment to the treasury will be considered final liability. "This will also increase the working capital which is critical to healthy functioning of all firms, but particularly SMEs, which are often run on private equity," it said.
IDEAS also recommends that the RSST maintain the exemptions of the GST regime, including the 30 plus items that were zero-rated. "The coverage of taxable goods and services should also remain as it is under the GST regime," it said.
The Government should also maintain the current practice from the GST regime of exempting the export of goods and services from the RSST to encourage development of Malaysia’s export sectors, it added.
To ease the burden on small businesses, the GST's minimum threshold of RM500,000 of taxable return per annum should also be kept — and not be reverted to the RM100,000 threshold under the old SST — while tax payment should be made as simple as possible, with standardised and simplified administration procedures that incorporate the best practices of GST.
Those who meet the minimum threshold should be registered under the Royal Malaysian Customs, which will increase transparency of the tax system and enable customs officials to more easily identify businesses that are trying to escape from paying the new tax.
The government should also establish a fund of RM100 million to smoothen the transition, and ensure greater compliance to the new tax regime, just like how it established a similar fund to compensate for the costs associated with the introduction of GST.
"The government’s decision not to have GST will create extra disturbance for businesses and conversion to the new RSST platform will entail additional costs for businesses. We recommend an allocation of RM100 million for all SMEs, to cover the cost of installing software and imparting necessary training," Ideas added.
[INFO] GST vs SST: What’s the difference?
June 24, 2018
As the new Pakatan Harapan government carries out its pledge of abolishing the goods and services tax (GST) and bringing back the sales and services tax (SST), many are still confused between the two. We put the 2 tax systems side-by-side as a quick comparison and lay it out easily for all to understand.
Starting from 1st June 2018, GST rate will be reduced to 0% from 6%. Now while many are celebrating this reduction of the GST rate, there is also a huge number that is mistaking it for the absolute dismissal of the GST altogether on the 1st of June. This is not accurate. The government has announced that the GST will be replaced and abolished by the SST on the 1st of September.
This is because as with all tax policies, the removal of the GST is dependent on our parliament repealing the GST Act of 2014 before it can be fully abolished. This also involves the changing of various tax reporting and filing protocols that have become commonplace since its introduction in 2015.
When Dr Mahathir was asked about the rate at which the SST would be set, he answered:”We will study it”. The report on the SST is set to be submitted to the government in two weeks.
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[OPINION] SST to boost purchasing power of Malaysians
The Sun Daily
June 11, 2018
The purchasing power of Malaysians will be boosted with the re-introduction of the Sales and Services Tax (SST) in September, said KPMG Tax Services Sdn Bhd Indirect Tax Advisor Datuk Tan Sim Kiat.
He said the SST was a single level tax compared with the just zero-rated Goods and Services Tax (GST) which was charged at every stage of business transaction.
“A single level tax will put less burden on consumers and boost spending power further although the government might be on the losing end by foregoing extra revenue under the GST regime,” he told a press conference today after a briefing by KPMG and the Royal Customs Malaysian Department to business owners on how to file their taxes after the GST was zero-rated on June 1.
Last year, the government collected about RM44 billion in revenue from the implementation of the GST and with the SST in the pipeline, the government was only expected to accrue approximately RM30 billion in revenue, annually.
However, to date, how the SST mechanism would be implemented is still unknown as studies are still being conducted by the Finance Ministry and its related agencies.
The reimplementation of SST would also have to be tabled and passed in the July sitting of the Parliament, which would also repeal the GST Act 2014.
Tan also said the SST was a simpler and better tax model for Malaysia’s current economic situation.
“Prices will drop. However, there are various factors that cause prices of goods to go up. Consumers need to understand that SST will only apply to manufacturing and services industries. It will not affect everyone, compared with the GST which is broad-based,” he said. – Bernama
Expert Opinion: Implementation of SST
PM: GST to be Abolished
June 07, 2018
PUTRAJAYA, June 6 ― Prime Minister Tun Dr Mahathir Mohamad announced today the abolishment of the Goods and Services Tax (GST) Act and the Anti-Fake News Act.
“We will fully abolish GST and the Anti-Fake News Act when Parliament convenes in July,” he said after chairing the weekly Cabinet meeting here.
He said amendments to several other existing Acts will also be tabled in Parliament and that he will announce them at a later date.
The government had effectively removed the GST by zero-rating it starting June 1, but parliamentary approval is needed to formally dismantle the unpopular 6 per cent consumption tax and bring back the Sales and Services Tax by September.
PENDING: ENACTMENT IN PARLIAMENT/LEGISLATION
Dr M: SST to be reintroduced in September
May 30, 2018
The Sales and Services Tax (SST) will be reintroduced in September, says Prime Minister Tun Dr Mahathir Mohamad.
The Goods and Services Tax will be zero-rated from June 1, and the SST reintroduced to make up for the shortfall in government revenue.
However, it will require legislation to be enacted in Parliament.
(PENDING ENACTMENT IN PARLIAMENT/LEGISLATION)
MINISTRY OF FINANCE MALAYSIA
May 17, 2018
The fiscal reform initiative is already underway. The shortfall from Goods and Services Tax (GST) which is to be zero-rated effective 1 June 2018 will be cushioned by specific revenue and expenditure measures that shall be announced in due course. The Sales and Services Tax (SST) will be re-introduced. Expenditure reduction will begin with rationalisation, efficiency measures and reduction in wastages. Of significance, oil prices have been higher than the USD52 per barrel estimated for Budget 2018. This provides fiscal buffers for the immediate future. Fiscal responsibility, transparency and governance will be a paramount consideration in rolling-out the fiscal reform.
Abolish the GST and take steps to reduce cost of living
May 10, 2018
The Pakatan Harapan Government will abolish the GST within 100 days of coming into power. This will immediately reduce some of the burdens shouldered by the people.
Pakatan Harapan believes that citizens from the lower income group need to be assisted, not oppressed. The abolishment of GST will reduce the cost of living, increase the purchasing power and allow the people to spend their hard-earned money on other priorities.
In the short term, the Pakatan Harapan Government will replace the GST after it has been abolished with a new Sales ad Services Tax that is fairer and does not burden the population and businesses.