OECD moots gradual return of GST for Malaysia to strengthen its revenue source, Rafizi says many baskets better

PUTRAJAYA, Aug 27 — Malaysia should seriously consider bringing back the goods and services tax (GST) to increase its revenue, the Organisation for Economic Co-operation and Development (OECD) said in its report on Malaysia released today.

The OECD Survey of Malaysia 2024 noted that the country’s current tax system contributes only 12 per cent to the economy and suggested that the government explore ways to boost revenue since its spending, including on subsidies, eats up 3.5 per cent of the GDP.

However, Economy Minister Rafizi Ramli who was present for the launch at the Putrajaya International Conevention Centre here, did not seem keen.

“There are many ways to achieve fiscal strengthening with different groups offering varying perspectives.

“These matters will continue to be discussed at the government level. As it stands, my view is that the government’s narrative and policies have instilled a degree of confidence in both the market and investors that this administration is serious about focusing on fiscal consolidation.

“Any additional actions or policies will certainly be considered by the government,” he replied when asked about the OECD’s suggestion on reintroducing the consumption tax.

Rafizi explained that the 13th Malaysian Plan, which is currently being implemented, includes the development of specific policies and programmes for various sectors, including the micro, small and medium enterprises (MSME) industry and all possible outcomes are being discussed.

At the launch earlier, OECD director of country studies from its Economics Department, Luiz De Mello, stressed the need for Malaysia to maintain prudent debt levels to continue progressing.

He said spending needs to be financed by raising additional revenues through a well-designed value-added tax, a broader personal income tax base, and improvements in tax administration.

“The 2023 fiscal framework is a major step towards stronger fiscal accounts, maintaining a prudent debt level, and more effective fiscal risk management.

“However, the underlying institutional framework could be strengthened by expanding the fiscal frameworks to cover the consolidated public sector and contingent liabilities,” De Mello said.

The OECD suggested that Malaysia look into bringing back the GST in stages as one of the ways to increase revenue.