Inflation only up by 0.2% following service tax hike, says PM
Published on: Tuesday, March 26, 2024
By: FMT Reporters
The government expects an additional revenue of RM3 billion from the 2% increase in service tax and this will be channelled as direct aid to the people and help improve healthcare, schools and roads. (Bernama pic)
Kuala Lumpur: The increase in the service tax rate has not had a significant impact on inflation, with an estimated increase of around 0.2%, says Prime Minister Anwar Ibrahim.
However, Anwar, who is also the finance minister, said the government will continue to monitor any negative effects on the population through the consumer price index.
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“Our concern is the impact on inflation (when the service tax is increased). We do not deny there is an effect but so far, according to the statistics department, the effect is about 0.2%,” he said in the Dewan Rakyat.
“That’s why we try to help by increasing contributions to the cash aid programme (STR) and several other forms of assistance because we understand the increase in the cost of living,” he added, stating that RM10 billion had been given away through STR this year.
He was responding to a question from Shahar Abdullah (BN-Paya Besar), who asked the government to explain the impact on the cost of living for the people and the production cost of industries due to the increase in service tax for certain sectors from 6% to 8%.
The tax adjustment, which came into effect on March 1, only focuses on discretionary service activities and business-to-business activities to ensure the people are not burdened with higher consumption tax rates, especially in essential services.
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Tax for services widely used by the people – such as food and beverages, food and beverage delivery, logistics, telecommunications and parking – remains at 6%.
The government expects an additional revenue of RM3 billion from the adjustment, which will help Putrajaya improve targeted assistance to the people. It also hopes it will help improve and maintain critical public infrastructure such as healthcare, schools and roads.
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