KUALA LUMPUR, July 10 (Bernama) -- The government can reduce the dependency on direct taxation as well as simplify the tax system by implementing the Goods and Services Tax (GST), says Second Finance Minister, Datuk Seri Ahmad Husni Hanadzlah.
The GST will be implemented with effect from April 1, 2015.
He said the GST revenue will add to the governments's coffers as it steadily increases over the years and the country's economy expands towards 2020, when it is expected to achieve the status of a high-income economy.
"The primary reason why we need this revenue is to reduce the Treasury's dependence on direct taxes, and that includes personal and corporate income tax.
"We have already begun the process to lower gradually the personal and corporate income taxes from 30 per cent and 40 per cent respectively to 26 per cent and 25 per cent. For SMEs, it was dropped to 20 per cent," he added.
In his keynote address at the National GST Conference 2014 here today, Ahmad Husni also said the move will boost investments across the country as well as domestic consumption within the economy, following the less direct tax burden.
He highlighted that the strategic impact is for Malaysia, in percentage terms, to be less dependent on the external sector, which is exports.
"The GST at six per cent, gives the government an opportunity to simplify the tax system to just one rate from two different taxes and rates, while encouraging compliance and reducing both administrative and business costs.
"The private sector is a critical contributor to the growth of our economy. It is essential that an efficient tax regime is provided for them. An unwieldy tax regime is expensive to manage and costly to administer," he said.
Ahmad Husni expressed concern that without the additional revenue the government will not have sufficient allocations to educate business communities in all the economic sectors to scale up through the value chain.
He said the government at present is intensifying efforts to promote the incorporation of higher value into the export-based sector, especially manufacturing, to obtain higher sale prices by incorporating greater value to manufactured goods.
"The government however, requires money to develop and promote the adoption of industrial designs, not only in institutions of higher learning but also at the industry level.
"To encourage the development of anything, the Treasury will almost always introduce tax incentives, usually in the form of tax exemptions, tax holidays or even outright grants. Each of these incentives cost money.
"Every ringgit that the Treasury exempts, represents a ringgit spent. Tax incentives do not incur an immediate cash outlay but in the end, it costs the Treasury all the same," Ahmad Husni added.
The National GST Conference 2014 is jointly organised by Malaysian National News Agency (Bernama) and Tax Advisory and Management Services Sdn Bhd (TAMS).