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“As this broad tax base system would increase indirect taxes, it will give flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination,” says FMM president Soh.

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) has called on the government to reintroduce the goods and services tax (GST) in the upcoming Budget 2023.

It said the tax would be a timely lifeline for the country’s debt dilemma and shore up adequate fiscal buffers to weather the next economic downturn and it should be at a rate that would not burden the rakyat but still help widen its revenue base.

“As this broad tax base system would increase indirect taxes, it will give flexibility to the government to reduce direct taxes (personal income tax and corporate tax) to make Malaysia a more attractive business destination,” said president Tan Sri Soh Thian Lai in a statement, as reported by Bernama.

He said that in this regard, GST 2.0’s implementation should not be considered in isolation but as a part of the holistic assessment of Malaysia’s tax system that would require the government to consult all stakeholders for a thorough review process.

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Soh said manufacturers had proposed improvements to GST 2.0 to be more consumer-and-business-friendly, among others, reducing the GST rate to 4% to boost conducive business conditions, gradually bringing down the corporate tax rate to 20% and zero-rate all essential goods and services.

“The government should maintain the GST registration threshold at RM500,000 and minimise delay in refunds, especially for exporters and businesses with zero-rated supplies, as the long refund period between six and eight months has rendered the GST into an accumulating tax burden,” he added.

According to the FMM-Malaysian Institute of Economic Research Business Conditions Survey for the first half of 2022 (1H22) conducted in August 2022, 74% of the survey respondents strongly supported the GST to replace the current sales and services tax (SST).

Respondents to the survey viewed the GST as providing a fairer tax structure and it eliminated cascading and compounding of taxes commonly found in the SST regime.


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