An economist from the World Bank has advised Putrajaya to cut down on the number of items that have been exempted or zero-rated from the impending Goods and Services Tax (GST) in order to compensate for the drop in global oil prices.
Dr Frederico Gil Sander, a senior World Bank economist on Malaysia, said a broadened GST would help Malaysia wean itself off oil-related revenue, and contribute to the country’s economic structural reforms.
“The current decline in oil revenues could be an opportunity to review exemptions and zero-rated items and ensure that only those essential goods are not taxed,” Gil Sander told The Malay Mail Online‘s Zurairi AR.
There are currently over 900 items listed as being exempted or zero-rated under Malaysia’s GST, which is due to be implemented on April 1.
When Prime Minister Najib Razak announced his revised Budget 2015 on Tuesday, he stated that Putrajaya will encourage companies to register for the GST to collect an additional RM1 billion in taxes, thus increasing government revenues.
While the drop in oil prices has led Malaysia to do away with fuel subsidies, Gil Sander expressed concern over the Federal Government giving in to public pressure to reinstate thse subsidies when prices inevitably rise again.
“The government should begin now to think about measures to take when oil prices inevitably rise again in the future in order to avoid pressures to re-introduce subsidies,” he suggested.
The Federal Government abolished the fuel subsidy for RON95 and RON97 petrol and diesel, adopting instead a managed float system for fuel prices from December 1 last year.
Deputy Finance Minister Ahmad Maslan later said that Putrajaya might reinstate subsidies should global oil prices rise back up to above USD80 (RM289) a barrel, although not in the previous form of blanket subsidies.
