SHAH ALAM - Economic experts believe that the Sales and Services Tax (SST) is still considered the best system for implementing targeted taxation in the country, given the suitability of the local economic landscape.
Malaysian Tax Accountants Association (Mata) deputy president Dr Mohd Fairuz A Razak however said that the government still needed to make several improvements to make it more effective compared to the Goods and Services Tax (GST) that was previously introduced in the country.
He said that the improvements should include exempting taxes specifically on all food items, vegetables and fruits comprehensively so that these related items truly meet the targeted needs.
“SST is indeed more people-friendly at this time because its tax rate is not imposed uniformly compared to GST.
“However, essential goods, including imported food products, should not be taxed since they are important elements in the lives of the people, even though some of them may be considered luxury items enjoyed by the affluent.
“My question is, how will the government ensure the separation of luxury items such as vegetables, fruits and livestock products can be enforced comprehensively without burdening distributors and retailers?
“Most importantly, are all food items, vegetables and imported fruits only enjoyed by high-income groups? What about onions, salt, mangoes and bananas that are also daily foods for the B40 group?” he said when contacted by Sinar on Tuesday.
Previously, Prime Minister Datuk Seri Anwar Ibrahim emphasised that the government was not ready to reintroduce GST at the time because the economy of the people has not yet fully recovered.
Anwar said that the government chose to continue with the more targeted SST system because it only imposed taxes on certain goods, particularly luxury imported items.
Therefore, Fairuz said that all essential goods, including those imported from abroad, should also be exempted from SST tax.
“The country indeed imports a lot of essential food from other countries. So, one way is for the government to exempt food to ensure it is more targeted.
“If not, it will become a major issue and backfire on the government again because essential food is a necessity for living, not merely something fancy enjoyed by certain groups,” he said.
Fairuz emphasised that the implementation of targeted SST could only be achieved if the government conducts a thorough review of the list of goods that would be taxed.
He said certain fruits considered 'luxury item' like avocados, were now also enjoyed by people from various groups, including those with low incomes (B40).
He also advised the government not to rush into expanding SST because many among the people and traders were still confused about the actual number of items subject to tax.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that the implementation of frequently changing tax policies in the near term would only burden the people and traders.
However, he believed that SST could be considered a more suitable tax system to implement in the country's economic landscape if it remained consistent.
“So, the issue is more about the method of implementation and enforcement of the policy more consistently to ensure that the SST system is more effective in its implementation,” he said.
He explained that the current implementation of SST showed positive results in line with the government's need to increase national revenue in a targeted manner.
“This means that the existing system must meet the targets or objectives of the government to improve their financial position by reducing the fiscal deficit and making the Federal Government's debt more stable,” he said.