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Global Tax 50 2014: Najib Razak

16 December 2014

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Malaysian prime minister

Najib Razak
Najib Razak is a new entry this year

Following a succession of many leaders whose popularity dropped after increasing taxes, last year Malaysia's Prime Minister Najib Razak announced that from April 2015, a 6% goods and services tax (GST) would replace the outdated sales and service taxes. Despite criticism, Razak has adamantly maintained that broadening the tax base is an important step in Malaysia's transition from a developing to developed country.

"We are one of the very, very few countries in the world which does not have a GST. But there are challenges. Anything to do with any new form of tax, like consumption tax in Japan, carbon tax in Australia, these are big issues that cannot be easily decided," said Razak.

The 6% GST is meant to raise a total of 23.2 billion ringgit ($6.78 billion) in its first year. The amount will eclipse the funds raised from the previous sales and services taxes, with much of the excess being used for assistance programmes. The government has been working hard to prepare itself and taxpayers, seconding professionals out to firms and bringing professionals in from abroad to train staff domestically. Razak also pledged RM 4.9 billion ringgit ($1.4 billion) to help low income households during the transition.

In his 2015 Budget, Razak expanded on the exemptions in his 2014 Budget. Some basic food items such as bread and coffee, more than 2900 medicines, health and education services, will be exempt.

Though the unpopular GST has knocked Razak's domestic approval ratings, tax professionals can thank him for the increasing demand in their services. In addition to government preparation, an inflow of professionals have been brought in to train private lawyers and accountants to handle GST related issues.

Razak's influence does not stop at Malaysia's borders, either. Fellow ASEAN members Vietnam and the Philippines may follow suit by introducing GST and will be watching Malaysia as it implements the new tax. The government has announced a one year grace period before corporations will be punished for not being compliant or having incorrect paperwork.

Though it has been his most ambitious tax policy, GST is far from Razak's only major fiscal reform. The corporate tax rate will be reduced by one percentage point in 2016 to 24%. Razak is reducing individual income tax in 2015 by between one and three percentage points, depending on income brackets. In 2014, he also increased real property gains tax and minimum property purchase price for foreign residence owners to help cool the housing market.

2015 will be a crucial year for the Razak regime as tensions, criticism, and spending rise in the lead up to the April 1 GST implementation date.

Further reading
Malaysia's Budget cuts corporate tax rate, but only in two years
Malaysia likely to achieve GST in 2015

The Global Tax 50 2014
View the full list and introduction
Gold tier (ranked in order of influence)
1.  Jean-Claude Juncker  2.  Pascal Saint-Amans  3.  Donato Raponi  4.  ICIJ  5.  Jacob Lew  6.  George Osborne  7.  Jun Wang  8.  Inverting pharmaceuticals  9.  Rished Bade  10.  Will Morris

Silver tier (in alphabetic order)
Joaquín Almunia Apple Justice Patrick Boyle CTPA Joe Hockey IMF Arun Jaitley Marius Kohl Tizhong Liao Kosie Louw Pierre Moscovici Michael Noonan Wolfgang Schäuble Algirdas Šemeta Robert Stack

Bronze tier (in alphabetic order)
Shinzo Abe Alberto Arenas Piet Battiau Monica Bhatia Bitcoin Bono Warren Buffett ECJ Translators Eurodad Hungarian protestors Indian Special Investigation Team (SIT) Chris Jordan Armando Lara Yaffar McKesson Patrick Odier OECD printing facilities Pier Carlo Padoan Mariano RajoyNajib Razak Alex Salmond Skandia Tax Justice Network Edward Troup Margrethe Vestager Heinz Zourek






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