SST impact to be seen in two years, says tax expert

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KUALA LUMPUR (Aug 3): The impact and efficacy of the new sales and services tax (SST) can be seen in as early as two years, according to a tax expert.

“A two-year timeframe is good enough to give you an idea of where things have gone wrong or where things can be improved, whether the revenue really is coming in at the level you dictated or if it falls below what you predicted," said Axcelasia Inc chairman Dr Veerinderjeet Singh. 

“To get an idea of whether the system is stable and if we are able to collect the revenue as predicted, I think that (two-year period) lets you assess whether you should look at other options or not,” he told a press conference here, after a seminar organised by Axcelasia on the reintroduction of the SST today. 

As an integrated professional services group, Axcelasia also provides tax advisory, among others.

Veerinderjeet — who is also the current chairman of the taxation committee of the Malaysian Institute of Accountants, and the vice-president of the Malaysian Institute of Certified Public Accountants — said under the previous SST regime, the threshold for sales tax was generally at RM100,000, while the service tax was usually deferred, depending on the type of service that was provided.

Now the SST threshold has been set at RM500,000 across the board, which is similar to the previous goods and services tax or GST. “The old SST had different thresholds for different types of businesses and sectors, hence the new [standardised] threshold is a good initiative and makes sense as it is easier to manage,” he said. 

Additionally, he commended the availability of online submissions, filing, payment and applications under the new SST, saying is the way forward as it promotes efficiency.

“The old SST always had the issue of intermediaries, where manufacturers need to have face-to-face interaction with Customs officers. With online application, it could also prevent corruption from occuring,” Veerinderjeet added.

A taxable person under the new SST regime is a person who manufactures taxable goods and has exceeded sales threshold of RM500,000 and is mandatorily registered. The taxable person also includes manufacturers who has not exceeded the sales threshold of RM500,000, but has voluntarily registered under the new taxation scheme, he said.

The proposed sales tax rates are 5% and 10%, while the service tax rate is at 6%, which is similar to what was imposed under the previous SST regime.

Last month, Finance Minister Lim Guan Eng said the upcoming SST, which will come into effect on Sept 1 this year, will only be imposed on 38% of the basket of goods under the Consumer Price Index (CPI), as compared with 60% under the GST.

While Veerinderjeet sees the move to reintroduce the SST by the new government as a regressive step, he couldn't discount it may still be the right way to go for Malaysia at this juncture.

“From my point of view, for us to come back to SST when we have GST is a regressive step. But if the government thinks this is what we need because of rakyat cannot understand the (underlying value of) GST, then maybe it is the right way to go,” he said.

Veerinderjeet said some countries have also similarly reversed their introduction of the GST, though it was done at early stages, unlike Malaysia which is doing it after the tax has been in place for a few years. 

Perhaps Malaysia would go back to GST, when it feels it is more ready for it, he added.

Veerinderjeet, who admitted he is disappointed with the abolition of the GST and the reintroduction of the SST, said the new government should have looked at the bigger picture, instead of just focusing to comply with their manifesto agenda when it comes to tax. 

“[But] I do agree there is a long road of education in terms of improving compliance culture [in terms of taxation], and improving the level of government service,” he added.