OECD Recommends Govt Implement GST, Carbon Emissions Tax!

The Organisation for Economic Co-operation and Development (OECD) recommended that Malaysia reintroduce its goods and services tax (GST).

The OECD’s Malaysian economic survey for 2024 said this has to be done because the country needs to increase its revenue as tax receipts only account for 12 percent of the country’s gross domestic product (GDP).

Malaysia could follow this OECD best practice by reintroducing the GST, which was abolished in 2018, according to country studies branch director of the OECD’s economics department. Any possible regression could be offset via targeted aid to vulnerable households. And personal income tax group could be also broadened.

Source: https://selangorjournal.my

GST replaced the Sales and Services Tax (SST) on 1 April 2015. And GST reportedly netted the government RM27.3 billion over eight months. Subsequently, GST provided above RM40 billion in revenue a year. Meanwhile, the OECD report also recommended a carbon emission tax, saying fuel subsidies were ineffective.

When you look at one ratio, tax revenue to GDP, it is persuasive that the ratio should be at 15-18% of GDP (as in western countries or even in ASEAN). In our case, the denominator (GDP) has grown while the numerator has not increased significantly. Partly due to enforcement and partly due to tax base.

GST is not the answer. It is regressive, creates higher inequality, will possibly increase inflation and we are not a developed country yet, like OECD or Singapore. What could we do under a tax reform is to examine tax collection, tax avoidance, new taxes that could be paid by the “rich” individuals or companies with “excess” profit. We have GLCs making RM1 billion a quarter! From whom? The rakyat. So, structure those taxes to make Malaysia more egalitarian, please!

Reference:

OECD recommends govt implement GST, carbon emissions tax, Zarrah Morden, Malaysiakini, 27 August 2024