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Malaysian GST Will Counteract Future Reduced Oil Taxes

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

07 December 2009


Datuk Seri Najib Razak, Malaysia’s Prime Minister, has said that the objective of the new goods and services tax (GST), when introduced, would be to ensure that the country’s public finances were more broadly-based in the future.

In a recent speech to the Federation of Malaysian Manufacturers, he stated that the government was aware that Malaysia is, at the moment, overly-dependent on the 28% income tax on petroleum operations in the country, and that there is a risk to its public finances when those revenues reduce as oil reserves become depleted.

Therefore, although he did not take the opportunity to confirm when the GST would be implemented, he emphasized that the government’s eventual objective was to make the country’s public finances more sound and secure. An element in that would also be to use the advent of the GST to improve the tax collection system, which would be looked at closely.

In any case, he said, the government would seek to ensure that the GST was introduced gradually, and be aligned to current sales tax rates, so as to ensure that it does not overburden people on low incomes. He added that, for that reason, basic and essential goods would be exempt from the new tax.


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