KUALA LUMPUR (Nov 2): The government should consider bringing back consumption-based tax, like goods and services tax (GST), in order to raise its revenue base while also providing some room to manoeuvre on other taxes such as personal and corporate income taxes.

This is also on the back of mounting concerns that Malaysia’s federal government revenue, which will continue to expand, is forecasted to trend lower to 13.9% of GDP in 2022-2024, from 15.9% in 2020.

“I’m still rooting for GST but of course at a much lower rate. Rather than 6%, for a start it can be around 3%,” said Trident Analytics chief research officer Peter Lim Tze Cheng during UOB KayHian’s Post-Budget 2022 Virtual Roundtable.

“A big chunk of our [federal government] revenue is derived from income tax and corporate tax. 

"The only way that we can actually re-adjust and be more competitive compared to our neighbours [in terms of income tax rate] especially Singapore is a new stream of consumption tax,” said Lim.

Meanwhile, ISEAS-Yusof Ishak Institute senior fellow Dr Hwok-Aun Lee suggested a consumption-based tax at state level.

“It makes a lot more sense because consumption takes place at the local level and it can be recycled within the state, whereas income and profit are derived more from federal government infrastructure and services,” he said.

This also doubles to address the issue of states' over-reliance on land-based revenue which resulted in issues like deforestation in the past, he added.

In Budget 2022, one of the measures to beef up federal government coffers was the proposed one-off “Cukai Makmur” where any profit beyond RM100 million for the assessment year 2022 will incur a higher tax rate of 33%, from 24%.

On this, Lim argued that the year of assessment should be 2021 to better reallocate profits from companies that had done well during the pandemic.

“Of course [that is] the intention… but technically those who did good [in the pandemic had a showing] in 2021, whereas this tax is for 2022 [when] everything has normalised.

“Technically it should be [imposed for] 2021 [when] you can see a lot of sectors who did extremely well during the pandemic,” he said.

See more Budget 2022 highlights here.

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