The World Bank recommends Malaysia reinstate the Goods and Services Tax (GST) or Value-Added Tax (VAT) to boost tax revenue and fund development. The report highlights that Malaysia's current tax collection is below average for lower-middle-income countries, hindering government spending on crucial areas. Reintroducing GST is projected to significantly increase revenue through both direct and indirect taxes, stimulating long-term economic growth.
The World Bank has suggested that Malaysia should make some tax changes, like bringing back the Goods and Services Tax or Value-Added Tax .
Right now, Malaysia’s indirect tax revenue is only 3% of its GDP, which is below the average for low-income countries.It suggested reintroducing the Goods and Services Tax or Value-Added Tax , both of which are seen as efficient tax systems that can be implemented quickly and broadly.The report says a simulation shows that switching from the current Sales and Services Tax to a 10% GST with few exemptions could bring in about 1% more of GDP in extra revenue, without affecting inequality much.
On top of that, the World Bank estimates that another 1% of GDP could be raised by boosting individual income tax revenue through the proposed tax changes.The report suggests that increasing income taxes on high-income groups could create fiscal space and reduce inequality while keeping the tax burden manageable.
The World Bank highlighted that Malaysia’s current tax system only reduces inequality at a rate similar to other upper-middle-income countries, and non-cash benefits like healthcare and education still fall short.
MALAYSIA TAXATION GST VAT WORLD BANK ECONOMIC DEVELOPMENT REVENUE INEQUALITY
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