Experts say: Don't tie GST to wage threshold

PETALING JAYA: Setting a RM4,000 minimum wage as a condition for reintroducing the Goods and Services Tax (GST) is not economically sound and inconsistent with Malaysia's broader national goals, say experts.
According to tax expert Datuk Koong Lin Loong, the government should focus on strengthening the country's tax fundamentals ins­tead of tying GST to an arbitrary wage threshold.
'RM4,000 is still a long way off, especially for unskilled workers. Raising wages without addressing root causes could backfire,' he said.
Koong noted that over 50% of Malaysia's revenue is from direct taxes – mainly corporate and personal income tax – but this model has limitations, especially for a nation aiming to attract more foreign investment.
'GST, introduced in 2015, was a more efficient and refined form of indirect taxation. Relying hea­vily on direct tax is not sustainable,' he said when contacted.
Koong added that claims of GST burdening the poor are often overstated.
Under the previous system, essential items such as school uniforms and basic foods were zero- rated.
A household earning RM1,700 and spending mostly on essentials would pay only around RM100 a month in GST – an amount offset by current cash aid programmes, Koong said.
'In contrast, under the Sales and Service Tax (SST), many items consumed by lower-income house­holds are taxed at 5% to 10% and businesses can't claim back input tax, making products costlier,' he added.
Koong stressed that GST is a consumption-based tax that allows greater control – those who do not buy non-essentials pay less tax.
'If you earn RM1,700 but avoid luxury items, your tax exposure remains low,' he said.
Koong also noted that GST's single invoice and input-output cre­dit system offer greater transpa­rency and efficiency compared with SST, which lacks such mecha­nisms and often involves multiple invoicing.
On Sunday, Prime Minister Datuk Seri Anwar Ibrahim said the government is not ready to implement GST as it will unfairly burden low-income Malaysians.
He said it will be feasible to imp­lement GST if the country's economy grows stronger and the minimum wage is RM4,000 and above.
Anwar said SST targets impor­ted and luxury goods rather than daily necessities.
Prof Dr Wong Chin Yoong, from Universiti Tunku Abdul Rahman's Teh Hong Piow Faculty of Business and Finance, Department of Eco­no­mics, said the RM4,000 minimum wage benchmark is arbitra­ry and economically unjustified.
'Why RM4,000? Why not RM3,000 or RM2,500? It seems like an ad hoc figure with no clear basis,' he said.
Prof Wong added that tying GST to wage levels contradicts Malaysia's goal of becoming a high-income nation and top-30 global economy by 2030.
'At the current pace – RM300 increments every two years – it would take 15 years to reach RM4,000. That would delay GST until 2040, well beyond our high-income target,' he said.
Prof Wong said Malaysia is already economically and fiscally prepa­red for a value-added tax, noting that over 90% of taxable manufacturing goods are now covered under the expanded sales tax.
'Despite broader coverage and higher rates, SST still generates less revenue than GST. That limits funding for development and welfare programmes,' he added.
Commenting on the Prime Minister's recent remarks, SME Association president Chin Chee Seong said the RM4,000 minimum wage threshold set as a condition for reintroducing the GST appears arbitrary and could delay tax reform for decades.
'It's unclear where the RM4,000 figure comes from. The real issue is that the government urgently needs revenue to support deve­lopment and essential services,' he said.
Chin added that GST allows businesses to claim input tax, reduce costs and improve competitiveness.
In contrast, SST and rental costs become direct business expenses, which puts local manufacturers at a disadvantage compared with countries using GST, he said.
Chin also questioned the idea that only high-income nations should implement GST, pointing out that countries like India, Thailand and Indonesia have already adopted it.
'Even a 4% GST is manageable. The argument that the poor shouldn't pay tax is flawed.
'Instead, targeted aid like the Rahmah Cash Aid (STR) could help lower-income households manage the impact,' he added.
The Malay Chamber of Com­merce Malaysia, however, supports the government's cautious stance on reintroducing the GST, calling it a pragmatic move that reflects concern for the people's economic well-being.
Its secretary-general Abd Halim Husin said GST should only return once the economy strengthens and wages rise, noting that a fair, transparent and efficient tax system is vital for investor confiden­ce and small and medium enterprise (SME) sustainability.
'GST is more comprehensive and less prone to leakage than SST, but its implementation must not burden small businesses or consumers.
'With the economy still recove­ring and operational costs high, SST remains the better option for now,' he said.
However, Abd Halim believes a future transition to GST is necessary once economic conditions and SME support structures imp­rove.
He urged the government to prepare a detailed transition plan that includes automation incentives, digital training and tax compliance support to help bumiputra SMEs adapt.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

The Sun

43 minutes ago

• The Sun

UM crowned champion of 31st Environmental Debate Competition

SERI ISKANDAR: Universiti Malaya (UM) emerged as the champion of the 31st Environmental Debate Competition held at Universiti Teknologi Petronas (UTP) here tonight, defeating 28 other institutions of higher learning. Represented by four debaters – Azhad Hafiz Md Razip Han, 22, Khairul Nur Ayuni Rodzan Khairul, 22, Aiesya Salsabila Mohd Radzuan, 23, and Ali Hydar Hafizi, 23 – UM took home the challenge trophy, accompanying trophy, RM12,000 cash prize, and certificates of participation. Although his team finished as runner-up, Ahmad Idzhad Hamzie, 21, a second-year Petroleum Engineering student, was named Best Debater and awarded a cash prize of RM2,000. Azhad Hafiz described the win as a hard-earned triumph, marking the team's long-awaited success after coming in second place in 2019. 'Back in 2019, we reached the final but only managed to be runners-up. This year, Alhamdulillah, we proved that UM can be champions,' he told Bernama. He added that environmental debate posed a unique challenge, requiring in-depth knowledge and understanding of issues to construct strong arguments. UTP secured second place and received an accompanying trophy, RM7,000, and certificates, while Universiti Putra Malaysia (UPM) came in third, winning RM2,000, a trophy, and certificates. The prizes were presented by deputy secretary-general of the Ministry of Natural Resources and Environmental Sustainability (NRES), Datuk Nor Yahati Awang. Also present were UTP provost Datuk Ir Dr Mohamed Ibrahim Abdul Mutalib, Universiti Malaysia Terengganu (UMT) deputy vice-chancellor (Student Affairs and Alumni) Professor Dr Mohd Izani Mohd Zain, who also chairs the University Debate Council (MADUM), and Petronas Group Health, Safety, Security and Environment vice president, Zamri Japar. In her speech, Yahati said the competition aligns with national aspirations to achieve the Sustainable Development Goals (SDGs), particularly SDG 4 on quality education. 'Early exposure to intellectual discourse not only sharpens students' critical thinking but also nurtures a sense of responsibility for environmental protection. 'This competition serves not only as an academic platform but also as a key avenue to spread the message that environmental sustainability is a shared responsibility involving government, private sector, academia, and the public,' she said. She added that NRES believes environmental awareness should begin in schools and continue through higher education, proving that education can be a powerful driver for sustainable change. The event was organised by the Department of Environment (DOE) in collaboration with MADUM, the Ministry of Higher Education (MOHE), Dewan Bahasa dan Pustaka (DBP), and the Ministry of Youth and Sports (KBS).

Daily Express

2 hours ago

• Daily Express

Bernama boss is named nation's top journo

Published on: Monday, June 23, 2025 Published on: Mon, Jun 23, 2025 By: Bernama Text Size: Wong holding the award. Kuala Lumpur: Malaysian National News Agency (Bernama) chairman Datuk Seri Wong Chun Wai was named the National Journalism Laureate at the Malaysian Press Institute (MPI)-Petronas Journalism Awards ceremony held last night. Wong, 64, brings over four decades of journalistic experience, having begun his career as a junior reporter at The Star in Penang in 1984. He then climbed the ladder to serve in various positions at its headquarters in Petaling Jaya. Wong is the 14th recipient of the prestigious award, joining the ranks of past luminaries, including the first recipient, the late Tan Sri Abdul Samad Ismail of Utusan Melayu (1988), the late Tan Sri Lee Siew Yee of the New Straits Times (1992), and Datuk Ishak Muhammad or Pak Sako (1995). Other notable past recipients include Tan Sri Johan Jaaffar, Datuk Kadir Jasin, Adibah Amin, the late Datuk Ahmad Rejal Arbee, the late Tan Sri Zainuddin Maidin and Datuk CC Liew. Wong said he felt 'small and humbled' to be among these luminaries. Advertisement The award was presented by Higher Education Minister Datuk Seri Dr Zambry Abdul Kadir. Apart from journalism, Wong has also held corporate leadership roles, serving as group chief editor, managing director, and chief executive officer of Star Media Group (SMG). In 2023, he was appointed Bernama chairman. He had earlier served as a member of its Board of Governors (2004–2010) and as a member of its Supervisory Council (2010–2014). He continues to write analysis pieces for Bernama. Wong remains a columnist for The Sunday Star, where his popular 'On The Beat' column has run since 1997, despite no longer being with SMG. Over the years, Wong has delivered numerous exclusives, including interviews with the late physicist Stephen Hawking and former US President Bill Clinton. In 2003, he won the MPI Best Feature Award for his investigative piece on Malaysians undergoing terrorist training in Afghanistan. He was also the first Malaysian elected into the Paris-based World Editors Forum and served as Chairman of the Asia News Network with over 21 media affiliates. 'This is an honour for me and certainly the pinnacle of my journalism journey,' he said. He advised journalists to go beyond standard news writing by dabbling in news analysis and commentaries. Wong is also the author of 'Penang's History, My Story', published in 2014 by The Star, and translated into Bahasa Melayu by Universiti Sains Malaysia. He has served as an adjunct professor at Universiti Kebangsaan Malaysia, his alma mater. 'My advice to fellow journalists is never to stop writing. 'I wish to commend my fellow veterans like Tan Sri Johan Jaaffar, Datuk Seri Azman Ujang, Datuk Yong Soo Heong, Datuk Kadir Jasin and Datuk Kuik Cheng Kang who still write, whether regularly or occasionally. 'Old journalists should never fade away, but continue writing,' he added. The veteran journalist has also embraced digital platforms such as Instagram, X (formerly Twitter) and YouTube to share his views. Wong said he strongly advocates for the engagement of professionally trained journalists, emphasising that 'we have undergone years of training, and are better equipped to understand legal boundaries and the sensitivities of Malaysia's multi-racial society.' 'More importantly, the established media is accurate and we take responsibility for what we publish,' he said. Wong dedicated the award to all journalists, particularly veterans and seniors, for their tireless service to the profession. * Follow us on our official WhatsApp channel and Telegram for breaking news alerts and key updates! * Do you have access to the Daily Express e-paper and online exclusive news? Check out subscription plans available. Stay up-to-date by following Daily Express's Telegram channel. Daily Express Malaysia

The Sun

2 hours ago

• The Sun

Tax Matters – How should businesses prepare for Sales and Service Tax expansion?

ALL businesses will be affected directly or indirectly by the significant expansion of the Sales and Service Tax (SST) regime which will become effective from July 1. This will flow through to the businesses either through the removal of about 3,400 items from the sales tax exemption list to the 5% and 10% categories, and through the introduction of six new taxable services. Unless the businesses are the final consumers of these goods and services, theoretically the role of the businesses would be to act as tax collectors for the government. In practice, inevitably some portion of the tax collected will be borne by the businesses as they will not be able to pass on the cost. Since services such as construction, finance and rental are integral to almost every industry sector, the tax increase in these areas will percolate or spread throughout the business ecosystem. What are the steps businesses should now undertake? Before July 1, businesses should review their supply chain and look at the impact of the SST changes on all the inputs and outputs of the business. This step will immediately give you an idea of the increased cost to doing business which will then lead you to determine whether you can increase and pass on the cost to customers. At this stage, you will be looking at reducing the cost through substitution with products and services that are not affected by the changes, or reduce the consumption of the taxable products and services. The next step to keep your costs at the same level would be to identify all the possible exemptions and deductions in the sales tax regime and similarly identify the exclusions and exemptions for service tax regime. Here, the focus should be to take advantage of the business-to-business exemption for services, and to benefit from the exemptions available for goods. In the bigger picture when you are looking at managing the overall cost to the business, you should take into account exclusions, deductions and group reliefs. For businesses that are not registered, you need to quickly assess whether the thresholds stated for the different services will be exceeded within the next 12 months to be calculated from July 1. The thresholds vary for different services from nil to RM500,000 and to RM1.5 million. Similarly, for sales tax purposes, new registrants should qualify as a manufacturer and exceed the sales threshold of RM500,000 for the next 12 months. Broadly speaking, manufacturing involves the transformation of materials or products from one state to another. Businesses should carefully assess whether their activities fall within the definition of 'manufacturing' under the Sales Tax Act. Importation of goods and services will attract imported sales tax and imported service tax. This is often ignored by the taxpayers largely because they are not registered for SST. A frequently used imported service could be financial services provided in the course of arranging financing for Malaysian companies. Another example would be leasing of assets by a foreign company to a Malaysian entity. Businesses should also review their contracts spanning July 1 to determine whether they are non-reviewable, in which case, they will be eligible for a 12 months' exemption from charging service tax. You need to identify SME lessees whose turnover will be less than RM500,000 and therefore exempted from paying service tax on their rental. This can be done by checking the portal that will be available next week where such SMEs will need to register. Businesses should ensure they do not breach the Price Control and Anti-Profiteering Act. For example, if you have leftover stock which has not been subjected to sales tax, you cannot increase your prices to reflect the increase that will be triggered from July 1. The final advice is that if you are unclear on the definitions or any issues surrounding your transactions, it will be best to seek the views of the Royal Malaysian Customs Department in writing to avoid future disputes with them. This should be done before July 1 or as soon as possible.