KPMG expects GST to stay at 6% for first 5 years

KUALA LUMPUR (Oct 31, 2013): KPMG Tax Services Sdn Bhd (KPMG) expects the government to retain the goods and services tax (GST) at 6% for the first five years of its implementation on April 1, 2015.
Executive director and head of tax Khoo Chin Guan said this measure will allow the people and businesses to adapt to the new tax reforms.
"We expect the government, particularly the Customs authorities in the early years of the implementation, to be lenient.
"This is something new, there are bound to be some hiccups, and therefore we think the government will be sensitive enough," he told a media briefing here today.
Khoo said Malaysia's rate is the lowest in the region compared to between 7% and 10% for other countries.
Ten regional countries have already implemented the tax system.
"The emphasis on GST can be supported by the fact that it provides a wide-reaching, stable, sustainable and efficient source of revenue for any government as it is based on consumption.
"This can be contrasted with corporate income tax where the tax revenue collection is dependent on the profitability of companies, which may be subject to the vagaries of economic cycles," he added.
Meanwhile, KPMG managing partner Mohamed Raslan Abdul Rahman said the GST will not burden the lower- and middle-income groups as essential items are tax exempted.
"With the introduction of GST also, the personal and income tax rates will be reduced marginally," he added.
Mohamed Raslan also said the GST will bring the informal sector into the tax net, further widening the government's revenue, which in turn would help the government achieve a balanced budget by 2020.
He said the government should introduce a subsidy card to help the needy along its rationalisation move, which he said is more effective than the 1Malaysia People's Aid (BR1M).
"The good part of the card is you only use it when you consume, whereas with BR1M, whether you consume or not, you still get it.
"That's why I think the government can look at the card system more favourably than the BR1M," he added.
Mohamed Raslan said KPMG might recommend this measure to the government next year. – Bernama