Kuala Lumpur, 21 June 2018: Today, IDEAS published a Brief IDEAS titled “Post GST Malaysia: Recommendations for a Reformed Sales and Services Tax (RSST)”. The short paper presents recommendations for the government to consider when re-introducing SST following the zero-rating of the GST.

The paper builds on lessons learned from both the rocky implementation of the GST and the imperfect SST that came before it. The paper argues that the transparency of the GST regime should be preserved, so that the consumer is aware of exactly how much tax they are paying. From a business perspective, the paper argues that the new tax should only apply to businesses with a taxable return of more than RM500,000 and exported goods and services should be exempted.

The main recommendations the paper proposes for the Reformed SST (RSST) include:

• RSST should simplify the process for business by returning to a single stage sales tax without a refund system, but maintain the higher threshold of RM500,000 and export exemptions from the GST regime;
• RSST should maintain the transparency of the GST regime by including the amount of sales tax paid on the final receipt
• RSST should adopt a standard rate and preserve the zero-rated goods from the GST regime;
• The government should support small business in the transition by establishing an RSST Compliance Fund; and
• The government should maintain high standards of enforcement and compensate for the inevitable loss of revenue by reigning in spending.

Commenting on the paper’s release, Ali Salman CEO of IDEAS said: “when the government brings back the SST it is important that it is transparent. The consumer should know what portion of the price they are paying is sales tax.

It is also important that the burden on business is minimised – the government should work closely with industry to ensure that lessons can be learned from both GST and SST. Ultimately we have to recognise that abolishing GST will result in less revenue but the government should continue its good practice of transparency about the nations finance and seek to reduce government spending.”

Brief IDEAS No 9 – Post GST Malaysia: Recommendations for a Reformed Sales and Services Tax (RSST) can  be downloaded here.