Malaysia's Decision To Postpone GST Welcomed By Business

by Mary Swire, Tax-News.com, Hong Kong

24 February 2006

The Malaysian government has announced that it is postponing the introduction of a goods and services tax until an as yet undetermined date in order to give small businesses more time to prepare for collecting the levy.

A statement issued by the Finance Ministry revealed that the government has heeded warnings from private sector organisations that many business, particularly small- and medium-sized enterprises, are unlikely to have fully functioning systems in place to implement the tax if it goes into effect on January 1, 2007.

In an attempt to smooth the transition towards the introduction of GST, the government has established a Tax Review Panel which is formulating legislation and procedures for the new tax regime.

The government has been studying GST and value added tax systems in various countries, including in Europe, Canada, Australia South Africa and Pakistan, but it is thought that the Malaysian system will replicate the British model most closely.

The postponement of GST has been welcomed by many private sector groups, including PIKOM, the Association of the Computer and Multimedia Industry of Malaysia.

"While most large organisations may already have a system in place for the introduction of GST, PIKOM is concerned about the smaller businesses that do not have a computerised system for transactions," observed Lee Boon Kok, PIKOM chairman.

PIKOM is also urging the government to provide comprehensive training on the various GST procedures in order to ensure businesses are in compliance with the laws from their start date.

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