Additional SST revenue can boost social assistance, says researcher
Published on: Friday, March 01, 2024
By:
Ameera Huda, FMT
With effect from today, consumers will have to pay a little more for their purchases but there will be no price increases for essential items.
PETALING JAYA: Additional revenue derived from the slew of new taxes and increases in some existing ones will benefit the country, according to a researcher at a think tank.
Chong Yoong Wen of Bait al-Amanah said funds collected from such taxes and then channelled to public infrastructure projects can create a “sort of” ripple effect.
ADVERTISEMENT
“For instance, building and improving roads can lead to increases in national productivity while also offering rural communities more economic opportunities,” he told FMT Business.
The increase in the sales and service tax (SST) from 6% to 8% comes into effect today.
Chong agrees with second finance minister Amir Hamzah Azizan’s view that the RM3 billion in additional revenue that can be derived from the higher tax rate can help Putrajaya provide better social services to the public.
Amir had said on Wednesday that the money could be used to underwrite the cost of improving critical public infrastructure such as hospitals, schools and roads.
ADVERTISEMENT
He also clarified that despite the higher tax rate, 85% of consumers nationwide will not see higher cost of utilities such as electricity.
However, Chong conceded that the 2% hike will lead to an increase in the cost of living despite the fact that certain essentials have been exempted.
ADVERTISEMENT
The new rate of 8% will not apply for food and beverages, telecommunication services and logistics, including the delivery of goods and parking services.
Spending on these items make up as much as half of all household expenses, according to the findings of a department of statistics Malaysia survey on mean monthly household expenditure.
On the new capital gains tax and high-value goods tax (HVGT), Chong said that while they expand the tax base, they are also less regressive.
Prime Minister Anwar Ibrahim told the Dewan Rakyat last night the HVGT is expected to bring in another RM700 million.
Chong said that while the additional RM3 billion that can be derived from the increase in SST represents less than 1% of the 2024 Budget, it will raise total indirect taxes by 5%.
This is more than the RM2.4 billion allocated to the Social Welfare Department under Budget 2024 for the benefit of hardcore poor households, elderly, children and the disabled.
“Overall, I believe the various increases in taxes will be a net positive for the nation as it will help to increase revenue and lessen the fiscal deficit, which is one of the goals set out by the government,” Chong said.
Last night, the Dewan Rakyat was told that the country has already achieved its target of reducing the fiscal deficit to 5% of the GDP, or RM91.4 billion, in 2023 from 5.6% or RM99.5 billion in 2022.
The finance ministry said the government is on track to achieve its target of reducing the fiscal deficit to 4.3% in 2024 after taking into account new loans amounting to RM85.4 billion.
Stay up-to-date by following Daily Express’s Telegram channel.
Daily Express Malaysia
