Taxes should prioritise people's overall well-being
TAXES are never popular.
So, it's not surprising that the recent expansion of the sales and service tax (SST) has ignited concern across Malaysia.
On June 9, the government announced a targeted review of the SST rate, which would take effect from July 1.
The tax rate would remain the same for essential goods, while a rate of 5% or 10% will be imposed on non-essential or discretionary goods.
It was presented as a measure targeting luxury items.
But the problem is, one person's luxury might be another's staple.
Going by the updated list of what's taxable, the SST could have a broader impact than most thought, raising concerns about an escalation in the cost of living for everyday Malaysians.
The government has previously indicated it is open to reviewing policies, especially when a lot of people raise concerns – and with the number of people worried about this tax, it would do well to make sure to review it and ensure it does not inadvertently place an undue burden on those who can least afford it.
The expanded SST encompasses a diverse range of necessities and services, not only premium goods, such as salmon and avocados.
It includes wedding rentals and catering, as well as traditional medicine, postnatal massages, elderly care and beauty treatments – services often seen as fundamental life events or crucial support rather than mere indulgences.
Adding to the apprehension, the expansion removes tax exemptions on some basic food items.
Items like mangoes, apples, oranges, dates, sauces, spices, canned fruits and instant food, which were previously exempt, will now incur a 5% tax.
This change is expected to increase food prices in markets, restaurants and homes alike.
The number of taxable items has increased from fewer than 1,000 to over 4,000 sub-codes, while the list of exempt items has been cut by 70%.
So the new tax will obviously have a wide-ranging impact on people's daily lives.
The announcement on Thursday by Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi that the government will review the implementation of the SST on selected imported goods, including common fruits such as apples and mandarin oranges, is a highly welcome development.
The government's willingness to re-examine the policy is a positive step towards ensuring that taxation genuinely serves its purpose without disproportionately affecting the vulnerable segments of society.
Taxes are unavoidable in modern civilisation and no country can function without them.
And, Malaysia certainly cannot continue to live with increasing budget deficits every year.
But the government must balance between increasing revenue collection and making sure the people don't suffer unnecessarily.
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Free Malaysia Today
2 hours ago
- Free Malaysia Today
Expanded SST offers nation buffer in tough times, say economists
Economists say the expanded SST, which will take effect on July 1, will come in handy in times of global uncertainty. PETALING JAYA : The expansion of the sales and service tax (SST), set to take effect next month, will strengthen the government's fiscal buffer amid rising global uncertainty fuelled by wars, trade tensions, and shifting US policies. Economists say the move could help reduce national debt, raise tax revenue, and create more fiscal space for spending on critical areas such as healthcare, education, and targeted assistance for lower-income households. They also claim it is a safer and less costly option compared to reinstating the goods and services tax (GST), which would take time and effort to restart. Malaysia University of Science and Technology's Barjoyai Bardai said the SST expansion is not aimed at cost savings, but at boosting revenue to help narrow the country's budget deficit. Barjoyai Bardai. 'The government wants to collect more tax so that it can achieve the objective of reducing the deficit in the budget,' he said. Barjoyai said the government expects SST collection to hit RM52 billion this year, a big jump from the RM29 billion collected in its first year, and even higher than GST's peak of RM42 billion. 'If they can collect RM52 billion, then they can prove that SST is even better than GST. I believe SST can be developed into a better tax system than GST,' he said. He said the SST is generally more acceptable to the public as it does not affect consumers directly, with its primary targets being imports and manufacturing. 'So, people don't feel they are being taxed—at least psychologically,' he said. Yeah Kim Leng. Sunway University's Yeah Kim Leng pointed out that the country's tax-to-GDP ratio presently hovers just above 12%, one of the lowest levels in decades. He said the country can no longer depend on petroleum revenue or shrinking income taxes. 'We need to look for sustainable and stable revenue sources. Expanding the SST is a step in the right direction to gradually raise the revenue level so that we do not incur a higher deficit,' he said. Yeah said the additional revenue is needed to cover the rising costs associated with an ageing population, low retirement savings, and the need to improve essential services, particularly healthcare and education. 'It involves some sacrifices, some short-term pain in exchange for future gains. The expanded SST is not overly burdensome. They are targeting only luxury items and goods and services that are not essential,' he said. Afzanizam Abdul Rashid. Bank Muamalat chief economist Afzanizam Abdul Rashid said the SST expansion fits into the broader goal of fiscal reform. He said the service tax hike from 6% to 8% in March 2024 successfully raised SST revenue by 30.3% in the first quarter of 2025. That, together with the rationalisation of diesel subsidies, allowed the government to trim its fiscal deficit from RM26.4 billion (5.7% of the GDP) in the first quarter of 2024 to RM21.9 billion (4.5%) in the same period this year, said Afzanizam. 'This has allowed the government to allocate more for Sumbangan Tunai Rahmah and Sumbangan Asas Rahmah, totalling RM13 billion for 2025, from RM10 billion in 2024. 'This is the evidence of how fiscal consolidation exercises can help the government create a fiscal space so that it can spend on improving the livelihood of the rakyat in the short term,' he said. Afzanizam said that beyond cash handouts, the extra revenue could be channelled to improve productivity through better investment in education, health, infrastructure, and security. The SST expansion, effective July 1, will broaden the tax base to cover more imported goods and services, while keeping essentials tax-free to minimise inflationary pressure. Treasury secretary-general Johan Mahmood Merican said the expanded SST is expected to increase revenue by RM5 billion in 2025 and RM10 billion in 2026.
The Sun
4 hours ago
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M'sian customer frustrated after delivery rider allegedly demands tip
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The Star
6 hours ago
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Taxes should prioritise people's overall well-being
TAXES are never popular. So, it's not surprising that the recent expansion of the sales and service tax (SST) has ignited concern across Malaysia. On June 9, the government announced a targeted review of the SST rate, which would take effect from July 1. The tax rate would remain the same for essential goods, while a rate of 5% or 10% will be imposed on non-essential or discretionary goods. It was presented as a measure targeting luxury items. But the problem is, one person's luxury might be another's staple. Going by the updated list of what's taxable, the SST could have a broader impact than most thought, raising concerns about an escalation in the cost of living for everyday Malaysians. The government has previously indicated it is open to reviewing policies, especially when a lot of people raise concerns – and with the number of people worried about this tax, it would do well to make sure to review it and ensure it does not inadvertently place an undue burden on those who can least afford it. The expanded SST encompasses a diverse range of necessities and services, not only premium goods, such as salmon and avocados. It includes wedding rentals and catering, as well as traditional medicine, postnatal massages, elderly care and beauty treatments – services often seen as fundamental life events or crucial support rather than mere indulgences. Adding to the apprehension, the expansion removes tax exemptions on some basic food items. Items like mangoes, apples, oranges, dates, sauces, spices, canned fruits and instant food, which were previously exempt, will now incur a 5% tax. This change is expected to increase food prices in markets, restaurants and homes alike. The number of taxable items has increased from fewer than 1,000 to over 4,000 sub-codes, while the list of exempt items has been cut by 70%. So the new tax will obviously have a wide-ranging impact on people's daily lives. The announcement on Thursday by Deputy Prime Minister Datuk Seri Dr Ahmad Zahid Hamidi that the government will review the implementation of the SST on selected imported goods, including common fruits such as apples and mandarin oranges, is a highly welcome development. The government's willingness to re-examine the policy is a positive step towards ensuring that taxation genuinely serves its purpose without disproportionately affecting the vulnerable segments of society. Taxes are unavoidable in modern civilisation and no country can function without them. And, Malaysia certainly cannot continue to live with increasing budget deficits every year. But the government must balance between increasing revenue collection and making sure the people don't suffer unnecessarily.
