|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6% goods and services tax (GST) would replace the outdated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
"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
Though the unpopular GST has knocked Razak's domestic
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.