19 November 2015
When the government announced the
implementation of GST (goods and services tax), it
was met with various reactions. Some were unsure
while others welcome it with open arms as it will
put the nation in a much stronger financial position.
As we brace for change, what value will it add to
our nation, economy and people?
SCROLL DOWN
NUMBER OF COMPANIES
REGISTERED WITH GST
The GST will replace Malaysia’s Sales Tax (SST) (10%) and Service Tax (6%). It is only one of the measures that the government is taking to enhance the financial system of the country and find new sources of revenue by improving the efficiency of tax collection - but why now?
“With an estimated revenue of RM23.1 billion, the implementation of GST will inject a
much needed revenue for the nation.”
With the implementation of GST, the government aims to earn RM23.1 billion. This revenue will contribute to the nation’s development expenditure of RM50.5 billion which will be channelled into infrastructure investment.
As part of the government’s financial overhaul, the GST will help our nation achieve its economic goals. Has the implementation of GST in other countries contributed to their economies?
160 countries* around the world have the GST as part of their revenue stream. Here are eight examples of how the GST is implemented in our neighbouring countries:
INITIAL RATE
3%
CURRENT RATE
7%
IMPLEMENTED SINCE
1993
The Singapore government revises GST during periods of high growth: 3% (1994) 4% (2003) 5% (2004) 7% (2007).
Singapore spent S$4 billion (US$3.1 billion) over five years to offset GST. This offset package consisted of:
Direct transfer benefits in the form of cash payouts (GST credits, growth dividends, senior citizens’ bonuses).
CPF top-ups (post-secondary education account top-ups for students, Medisave top-ups for older Singaporeans).
Rebates (on utilities and public housing services and conservancy charges.
CURRENT RATE
10%
IMPLEMENTED SINCE
1993
Direct transfer benefits in the form of cash payouts (GST credits, growth dividends, senior citizens’ bonuses).
CPF top-ups (post-secondary education account top-ups for students, Medisave top-ups for older Singaporeans).
Rebates (on utilities and public housing services and conservancy charges.
CURRENT RATE
17%
IMPLEMENTED SINCE
1984
Administered by the State Administration of Taxation.
In 2007, the revenue from VAT was 15.47 billion yuan ($2.2 billion) which made up 33.9% of China's total tax revenue for the year.
Reduction in VAT:
13% that applies to products such as books and types of oils.
CURRENT RATE
10%
IMPLEMENTED SINCE
2000
Most basic foods, some education courses, some medical, health and care products plus selected services are exempt from GST.
All the money raised by the GST was to be provided to the states and territories, supposedly ending their dependence on the federal government's assistance.
INITIAL RATE
10%
CURRENT RATE
15%
IMPLEMENTED SINCE
1986
HISTORICAL RATES: 10% (1986) 12.5% (1989) 15% (2010)
New Zealand’s ongoing tax reform has resulted in surplus forecasts for 2015 and a projection of 4% economic growth across the next 12 months.
In 2010, the New Zealand tax reform package increased its GST rate from 12.5% to 15% and made the tax broader than most other developed countries.
New Zealand’s GST represents 10% of its gross domestic product (GDP), compared with 3.3% in Australia.
INITIAL RATE
3%
CURRENT RATE
10%
IMPLEMENTED SINCE
1989
HISTORICAL RATES: 3% (1989) 5% (1997) 8% (2014), 10% (2015)
The stepped tax increase in 2014 and 2015 are aimed at covering rising social welfare costs linked to Japan' ageing population.
Japan requires taxpayers to either maintain books and records to support amounts claimed for the credit or to use a simplified system for estimating the credit.
CURRENT RATE
10%
IMPLEMENTED SINCE
1977
VAT (equivalent to GST) was introduced in South Korea to consolidate the 8 indirect taxes previously in place to streamline the Korean tax system.
It is similar to the European Union’s VAT system, requiring re-calculation and payments to the tax authorities at each transaction point in the onward sales chain.
These taxes are collected and invested in social welfare for Korean residents. Non-residents and visitors to Korea may be eligible for a tax refund on purchased goods they will take out of the country.
INITIAL RATE
10%
CURRENT RATE
7%
IMPLEMENTED SINCE
1977
GST in Thailand was revised to 7% in 2010 at the request of business operators who felt the rate was too high.
The Fiscal Economics Office in Thailand earlier this year suggested that the old 10% GST rate to be reintroduced as every one per cent increase would generate 70-80 billion baht (US$2.14 billion US$2.45 billion) in revenue annually.
The Singapore government revises GST during periods of high growth: 3% (1994) 4% (2003) 5% (2004) 7% (2007).
INITIAL RATE
3%
CURRENT RATE
7%
IMPLEMENTED SINCE
1993
Singapore spent S$4 billion (US$3.1 billion) over five years to offset GST. This offset package consisted of:
Direct transfer benefits in the form of cash payouts (GST credits, growth dividends, senior citizens’ bonuses).
CPF top-ups (post-secondary education account top-ups for students, Medisave top-ups for older Singaporeans).
Rebates (on utilities and public housing services and conservancy charges.
CURRENT RATE
10%
IMPLEMENTED SINCE
1993
VAT and GST are applied to most goods and services in Indonesia, as well as imports.
Domestic consumption makes up for 55% of Indonesia’s GDP. This helped to protect Indonesia from the global economic crisis.
Indonesia’s exports are GST free.
Reduction in VAT:
8.4% reduced VAT rate on cigarette supplies
4% reduced VAT rate on in-house construction
CURRENT RATE
17%
IMPLEMENTED SINCE
1984
Administered by the State Administration of Taxation.
In 2007, the revenue from VAT was 15.47 billion yuan ($2.2 billion) which made up 33.9% of China's total tax revenue for the year.
Reduction in VAT:
13% that applies to products such as books and types of oils.
CURRENT RATE
10%
IMPLEMENTED SINCE
2000
Most basic foods, some education courses, some medical, health and care products plus selected services are exempt from GST.
All the money raised by the GST was to be provided to the states and territories, supposedly ending their dependence on the federal government's assistance.
HISTORICAL RATES: 10% (1986) 12.5% (1989) 15% (2010)
INITIAL RATE
10%
CURRENT RATE
15%
IMPLEMENTED SINCE
1986
New Zealand’s ongoing tax reform has resulted in surplus forecasts for 2015 and a projection of 4% economic growth across the next 12 months.
In 2010, the New Zealand tax reform package increased its GST rate from 12.5% to 15% and made the tax broader than most other developed countries.
New Zealand’s GST represents 10% of its gross domestic product (GDP), compared with 3.3% in Australia.
HISTORICAL RATES: 3% (1989) 5% (1997) 8% (2014), 10% (2015)
INITIAL RATE
3%
CURRENT RATE
10%
IMPLEMENTED SINCE
1989
The stepped tax increase in 2014 and 2015 are aimed at covering rising social welfare costs linked to Japan' ageing population.
Japan requires taxpayers to either maintain books and records to support amounts claimed for the credit or to use a simplified system for estimating the credit.
CURRENT RATE
10%
IMPLEMENTED SINCE
1977
VAT (equivalent to GST) was introduced in South Korea to consolidate the 8 indirect taxes previously in place to streamline the Korean tax system.
It is similar to the European Union’s VAT system, requiring re-calculation and payments to the tax authorities at each transaction point in the onward sales chain.
These taxes are collected and invested in social welfare for Korean residents. Non-residents and visitors to Korea may be eligible for a tax refund on purchased goods they will take out of the country.
HISTORICAL RATES: 10% (1992) 7% (2010)
INITIAL RATE
10%
CURRENT RATE
7%
IMPLEMENTED SINCE
1992
GST in Thailand was revised to 7% in 2010 at the request of business operators who felt the rate was too high.
The Fiscal Economics Office in Thailand earlier this year suggested that the old 10% GST rate to be reintroduced as every one per cent increase would generate 70-80 billion baht (US$2.14 billion US$2.45 billion) in revenue annually.
After its announcement, the government mandated that all businesses with sales turnover
of RM 500,000 must register for GST (voluntary for businesses with turnover of less than
RM500,000) before 1 March 2015 or face legal action.
Despite this, only 62% of companies in Malaysia has registered.
NUMBER OF COMPANIES REGISTERED WITH GST
out of
(*As of 29 January 2015)
45%
ARE VOLUNTARY
REGISTRATION
OUT OF THESE:
55%
ARE MANDATORY
REGISTRATION
60%
ARE MEDIUM-SIZED
BUSINESSES
40%
ARE SMALL
BUSINESSES
Admittedly, there is a lot of confusion on what goods and services that
are affected by GST. With more than 900 items in the list, how do we
know which items that are standard-rated, zero-rated or exempted?
6% GST on final price
Household items, untensils. clothing andaccessories
Goods and services in this category will be charged a tax rate of 6% at every stage of the supply chain. Every party except the final consumer can claim back credits on the GST they already paid (known as input tax).
0% GST on final price
Basic food items, unprocessed food items, most education materials
Goods and services in this category will be charged a GST rate of 0%. This means that GST is not charged to the final consumer and businesses can claim back credits on their input tax.
No GST cost to consumer
Residential property and healthcare
Goods and services in this category will be non-taxable and are not subject to GST. The final party in the supply chain can’t claim back credits on their input tax even if they might have incurred it earlier on.
For many countries, the implementation of GST has brought positive improvement to their GDP, tax revenue and a reduction in their inflation rate. How will Malaysia's economy fare with it’s implementation?
Click on any points in the chart to explore in detail our economic health.
You can also toggle between GDP, tax revenue, fiscal deficit and inflation rate.
(RM Billion)
(RM Billion)
(RM Billion)
(%Change of
Consumer Price Index)
GDP (RM Billion)
Fiscal Deficit (RM Million)
Tax Revenue (RM Million)
Inflation rate (% Change of Consumer Price Index)
GDP (RM Billion)
Fiscal Deficit (RM Million)
Tax Revenue (RM Million)
Inflation rate (% Change of Consumer Price Index)
GDP (RM Billion)
Fiscal Deficit (RM Million)
Tax Revenue (RM Million)
Inflation rate (% Change of Consumer Price Index)
GDP (RM Billion)
Fiscal Deficit (RM Million)
Tax Revenue (RM Million)
Inflation rate (% Change of Consumer Price Index)
GDP (RM Billion)
Fiscal Deficit (RM Million)
Tax Revenue (RM Million)
Inflation rate (% Change of Consumer Price Index)
As we progress as a nation, we rely heavily on the following industries to contribute to
our economy. With the implementation of GST, these sectors’
profits and productivity will definitely be impacted.
Discover the contribution of each of the sectors below as well as the
projected contribution for the upcoming years.
YEAR
2010
2014
2013
SECTORS
Without a doubt, the implementation of GST will definitely be a turning point for our country as it will add economic value to the country, people and businesses.
With GST, the government is expecting a revenue of RM23.2 billion in 2015. RM4.9 billion of this revenue will be pumped into programmes to cushion the impact of GST on the country. The implementation of GST would yield additional revenue following the fall in the price of oil, of which the country is highly dependant on.
All business inputs are now claimable, avoiding the cascading effect of tax through savings in non-capital inputs and special refunds. GST also mean less red tape and special tax packages from the government. For the tourism and its related industries, the government is expecting growth as tourists can now claim VAT when they spend in Malaysia.
Although it requires some adjustment at first, consumers stand to gain from the implementation of GST. With a growing list of exempted as well as zero-rated items, consumer can expect a price reduction on selected goods and services. The government is helping with initiatives such as reduction of the tax bracket as well as support in the form of BR1M.
45%
YES
55%
NO
Learn more about VAT and how it will help boost Malaysia’s tourism industry.
With the aim of addressing our widening income disparity and making our economy
more sustainable, the government hopes that GST will push our manufacturers and
businesses to be more competitive, in par with the growth of other Asian countries.
But how do we measure the success of GST’s implementation?
export demand is forecasted to be weaker, therefore domestic demand is forecasted to be stronger as public consumption and investment are expected to pick up the slack of the weaker private counterparts.
GST will raise tax receipts by an additional amount on top of the current earnings derived from existing sales and service tax.
The introduction of GST will make the taxation system more efficient, effective, transparent, and business friendly, therefore generating a more stable source of revenue.
Inflation rate will be higher following the adjustment of prices with the implementation of GST.
Same trend from 2015 but stronger from domestic demand from public consumption and investment.
GST will boost the country’s income which in turn will translate into additional public funds towards the people’s benefit.
*Estimated revenue from GST alone.
The more effective GST will help reduce the fiscal deficit in Malaysia for the long run.
Inflation rate will be lower due to the stabilisation of prices in the market.
Many would argue that the GST will benefit businesses and the
upper class of society while burdening the lower and middle
class citizens. How true is this?
What value will gst add to businesses, enterprises and the people?
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises...
What value will gst add to businesses, enterprises and the people?
2015 world economic growth was projected at 3.4% and 3.9% by the World Bank and IMF respectively
#GSTMLAYSIA
2015 world economic growth was projected at 3.4% and 3.9% by the World Bank and IMF respectively
#GSTMLAYSIA
2015 world economic growth was projected at 3.4% and 3.9% by the World Bank and IMF respectively
#GSTMLAYSIA
The government has mobilised selected governing bodies, as well as
established implementation programmes to monitor price movements
before, during, and after GST's implementation. What other
mechanisms are in place to ensure that GST will truly benefit the nation?
Get a glimpse of the sentiment and share your thoughts
on the implementation of GST.
45%
public health care
55%
Private health care
