The World Bank has urged Malaysia to consider reintroducing the Goods and Services Tax (GST) to boost tax revenue and reduce income disparity. The report highlights the potential benefits of GST implementation and suggests targeted assistance measures to mitigate its impact on low-income households.
The reintroduction of the Goods and Services Tax ( GST ) in Malaysia is a topic of ongoing discussion, with the World Bank recently recommending its implementation to improve the efficiency of the country's tax system and reduce economic inequality. The GST , which was previously abolished in 2018, could generate significant revenue for the government, estimated to be around 1% of the Gross Domestic Product (GDP) if implemented at a base rate of 10%, according to a World Bank report.
The report highlights that Malaysia's current tax revenue from indirect taxes is relatively low at 3% of GDP, significantly lower than the average for low-income countries. The World Bank emphasizes that implementing a GST or Value Added Tax (VAT) would be a highly effective way to increase tax revenue in the short term. They argue that these forms of indirect taxation are widely considered to be among the most efficient in a country's tax system, allowing for broad and swift implementation. The report also suggests that targeted assistance and rebates on GST could mitigate the impact on low-income households, ensuring that any increase in indirect taxes does not disproportionately affect them. While the government has not yet taken any concrete steps towards reintroducing the GST, the World Bank's recommendation carries significant weight. The potential benefits of increased tax revenue and reduced economic inequality are enticing, and the government may ultimately decide to pursue this option. However, there are also potential challenges associated with the reintroduction of the GST, such as public resistance and the need to implement a fair and effective system of rebates and exemptions. The government will need to carefully weigh these factors before making a decision
GST Malaysia World Bank Tax Revenue Economic Inequality Value Added Tax (VAT) Indirect Taxes
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