All material subject to strictly enforced copyright laws. © 2022 ITR is part of the Euromoney Institutional Investor PLC group.

The Global Tax 20: Mahathir Mohamad

Mahathir Mohamad became the first world leader ever to repeal a national VAT or GST system in 2018.


Prime Minister of Malaysia

The election of Mahathir Mohamad was momentous in many respects. His party, Pakatan Harapan (Alliance of Hope), is the first to dislodge the Barihan Nasional coalition since Malaysia gained its independence from the British in 1957.

Tax – as might be inferred from his inclusion in the Global Tax 20 – was central to both his campaign and his post-election agenda.

Barihan Nasional managed to hold power for so long, partly through extensive gerrymandering, and the electoral arithmetic was stacked firmly against Mohamad, who had to make a groundbreaking offer to the electorate. The central pillar of his promises? To remove the goods and services tax (GST) regime.

While Barihan Nasional has retained power, it has not retained popularity, and its introduction of GST in 2014 was deeply unpopular, particularly among poorer people, and was met with widespread protests and even riots.

Despite GST being a far better tax (from a technical perspective) than its predecessor, the sales and service tax (SST) regime, voters were left paying more as its base was far broader.

"As an individual I am very, very sad [to see SST replace GST] because coming from a tax background I know the consequences," said an experienced tax manager from the oil industry. "From a business perspective, as well, it's definitely hitting the businesses because… now service or sales tax has become a cost to the business."

Upon unexpectedly winning the election in May, Mohamad wasted no time in acting upon his election pledges. What would come first? Legalisation of homosexuality? The removal of the death penalty? No – he got rid of GST.

The tax was zero-rated on June 1, with the old SST regime reintroduced on September 1. This gave businesses very little time to prepare, and information on what the new SST would look like was initially sparse. Confusion reigned: "It's affected our pricing – we've needed to renegotiate a lot of contracts," said the oil industry tax manager, but it was in with the old and out with the new.

Thus, Malaysia became the first country ever to remove a national modern VAT or GST system, although Zambia will follow suit in 2019, removing its 16% VAT, which was first introduced in 1995. Though its democracy is described as "flawed" by the Economist Intelligence Unit's 2017 Democracy Index, the election of a new party is positive.

Mohamad, meanwhile, is by no means a dream candidate for change. He ruled Malaysia as Prime Minister from 1981 to 2003 with a rather authoritarian streak, and reportedly has ambitions to ensure his own son becomes Prime Minister one day. But the 92-year-old, who is the oldest person ever included in ITR's Global Tax features, has followed through on his central election pledge and has won praise from Amnesty International as he looks set to remove the death penalty.

Tax is often a key issue in elections, and in no country was this truer in 2018 than Malaysia.

more across site & bottom lb ros

More from across our site

Vikas Garg talks to reporter Siqalane Taho about how regulation, technology and the goods and services tax has affected the manufacturing company.
A major shift is underway in tax as the profession transitions from a mostly accounting and finance sector to a hybrid industry that requires significant IT skills, say tax experts.
The Biden administration is about to give $80 billion to the Internal Revenue Service to enhance the tax authority’s enforcement processes and IT systems.
Audi, Porsche, and Kia say their US clients will face higher prices under the Inflation Reduction Act after the legislation axes an important tax credit for electric vehicle production.
This week Brazil’s former President Luiz Inacio Lula da Silva came out in support of uniting Brazil’s consumption taxes into one VAT regime, while the US Senate approved a corporate minimum tax rate.
The Dutch TP decree marks a turn in the Netherlands as the country aligns its tax policies with OECD standards over claims it is a tax haven.
Gorka Echevarria talks to reporter Siqalane Taho about how inflation, e-invoicing and technology are affecting the laser printing firm in a post-COVID world.
Tax directors have called on companies to better secure their data as they generate ever-increasing amounts of information due to greater government scrutiny.
Incoming amendments to the treaty could increase costs on non-resident Indian service providers.
Experts say the proposed minimum tax does not align with the OECD’s pillar two regime and risks other countries pulling out.
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree