Enough time for goods and services tax implementation

PETALING JAYA: Experts believe the 18-month period given before the goods and services tax (GST) is implemented in late 2011 is enough time to properly disseminate information and educate consumers and businesses.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said yesterday the GST, which would replace the sales and services tax (SST), would be implemented 18 months after the second reading of the GST Bill next March. The bill would be introduced in the current sitting of Parliament, which ends on Dec 15.

Husni said the Government planned to impose the GST at 4% but selected essentials such as rise, sugar, cooking oil, flour and domestic transportation would be exempted.

Currently, Britain’s value-added tax is at 15% while Singapore’s GST is at 7%.

KPMG Tax Services Sdn Bhd executive director Tan Eng Yew said that 18 months from the second reading of the bill to implementation “is fair”.

Federation of Malaysian Manufacturers president Tan Sri Mustafa Mansur: The association reserves comment on the Government’s decision until after a meeting with the Finance Ministry. "We’re having a briefing with the ministry next week,” he said.

“From what I understand from the experience of other countries, the bare minimum is 12 months,” he told StarBiz.

Tan said there was already some awareness of the GST as it had been in the news in recent months. “To flow the information through may take some time,” he added.

Tan said the impact of the tax would depend on how it was implemented as the length of the supply chain of various goods and services and how much was taxed would matter before the product or service went to the market.

Consumers currently pay 5% services tax and a 10% sales tax under the SST where the sales tax is only collected at the point of import or when the local manufacturer sold the goods for the first time while tax is only imposed on only a few services.

According to the experts, under GST, the tax would be collected at value-added points from production to the final point of sales.

Proper paperwork would have to be produced as proof of tax paid at each level, which would give a better and more transparent sense of the real cost of goods and amount of tax paid.

“If properly implemented, the impact would be minimal,” Tan said. Husni has said the consumer price index would not increase due to the GST.

PricewaterhouseCoopers Taxation Services Sdn Bhd senior executive director Wan Heng Choon said the 4% tax rate was a sign the Government had taken heed of the concerns of consumers and businesses and the impact of the tax on them.

“The decision to give enough time before implementation is also a good move as it will give the public a chance to be informed about how the tax works as a lot of the reservations on the tax is due to the lack of understanding of how it will operate,” he said.

Prime Minister Datuk Seri Najib Razak was quoted by Bernama as saying in New York that the tax would be introduced “very gently”.

The 18-month period, Najib said, “will allow the public to give their comments, engage them, and if we find it necessary to fine tune it, we’ll do so.” The Government expects an additional RM1bil in annual revenue one year after the GST is introduced.

Meanwhile, the Federation of Malaysian Manufacturers (FMM) president Tan Sri Mustafa Mansur said the association reserved comment on the Government’s decision until after a meeting with the Finance Ministry.

“We’re having a briefing with the ministry next week,” he said.

The FMM, in a statement before the tabling of Budget 2010 last month, had been against the implementation of the GST. Among the concerns the federation voiced out was that the GST would not benefit ordinary consumers who were non-income tax payers as they would now have to pay tax for everyday consumption of goods and services.

“They would not benefit from the income tax reduction that is expected to accompany the GST implementation,” it said.