SHAH ALAM - Malaysia’s increasingly contentious tax debate could become another political headache for Pakatan Harapan (PH) as the country heads towards the 16th General Election (GE16), forcing the government to balance fiscal needs, business confidence and public concerns over the cost of living.
For Petaling Jaya MP Lee Chean Chung, the bigger risk for PH is not simply whether Malaysia should retain the Sales and Services Tax (SST) or revisit the Goods and Services Tax (GST), but whether businesses and ordinary Malaysians actually feel the benefits of economic growth.
“GDP seems to be doing well but the general public don’t feel it,” said Lee, a PKR lawmaker and member of the Parliamentary Special Select Committee on Finance and Economy, during Sinar Daily's Top News podcast, Time to Fix the System.
He said frustration among small and medium enterprises (SMEs) over tax complexity and rising costs could translate into wider dissatisfaction with the government.
Lee said the government needed to examine whether its tax policies were contributing to a perception that it was “not friendly to small businesses”, even as larger investments and sectors such as data centres receive government support.
The issue could carry political weight ahead of GE16, with SMEs and the wider business community capable of shaping broader public sentiment.
Prime Minister Datuk Seri Anwar Ibrahim has maintained that SST will remain the country's tax foundation, while the government studies possible improvements based on economic conditions and the public's ability to cope with taxation.
But the debate is increasingly moving beyond a simple GST-versus-SST choice, with attention turning to whether selected GST-style mechanisms could be incorporated into SST to improve efficiency and certainty without reviving GST's political baggage.
Lee said businesses could at least operate with greater certainty under GST, which he argued was preferable to an SST regime that has been repeatedly amended.
“No one likes taxes,” he said. “Among the two, at least GST has that certainty.” He criticised frequent changes and new guidelines under SST, saying businesses could not be expected to constantly retrain staff.
“You don’t expect to send your admin for training every three months. That’s cost. That’s business cost,” he said.
Lee said the uncertainty could translate into additional costs for businesses and eventually workers and consumers.
He cited mall tenants affected by changes involving rental, electricity and water charges, as well as concerns over the treatment of contract workers under Section 12B of the Services Tax Act.
Lee claimed manpower agencies could face SST implications involving Employees Provident Fund (EPF) and Social Security Organisation (Socso) contributions, as well as mileage claims.
He cited a major logistics delivery company employing tens of thousands of workers which, according to him, was facing an additional RM2 million to RM3 million in SST every month.
He warned that such costs could eventually affect workers through reduced increments or restrictions on claims.
“It’s ripple effects,” he said.
Lee called for a more rational discussion on GST, arguing that Malaysia should not reject a tax mechanism solely because of its political history.
He said a system that may not have been suitable in 2018 could be reassessed against today's economic realities.
He suggested considering GST, value-added tax (VAT) or another multi-tier collection mechanism to ease the burden on SMEs and strengthen export competitiveness through input tax credits and refunds.
His comments come as Barisan Nasional and Umno leader Datuk Seri Ahmad Maslan has also linked SST dissatisfaction to political sentiment, saying it could have contributed to some Chinese business communities moving away from PH.
Ahmad, who is also Deputy Works Minister, said businesses may favour GST because it allows input tax credits or refunds.
He said GST could improve transparency, government revenue and efforts to reduce the black economy, while acknowledging concerns over delayed refunds.
With GST still carrying political baggage from the 2018 election and SST facing persistent business complaints, Lee said the government needed a more rational debate over the country's tax architecture.
For PH, that presents a difficult electoral equation.
Moving towards GST-style taxation risks reopening one of its most politically damaging issues. Retaining an increasingly complex SST, meanwhile, risks deepening dissatisfaction among businesses and consumers.
The real dilemma may therefore be neither GST nor SST, but whether PH can build a tax system that raises sufficient revenue, gives businesses certainty and protects consumers - without turning taxation into another GE16 liability.