Experts urge SST delay to ease transition pains

The Star

a day ago

PETALING JAYA: With the expanded Sales and Service Tax (SST) set to take effect tomorrow, economists are calling for a postponement to ensure a smooth transition for businesses and the public amid ongoing adjustments.
While there is a need for a clear and stable implementation process for all parties to come on board, they said the government must also manage its spending effectively, facilitating reforms aimed at easing the cost of living.
Tunku Abdul Rahman Univer­sity of Management and Tech­nology Centre for Business and Policy Research chairman Assoc Prof Dr Foo Lee Peng said delaying the expanded SST's implementation would allow both businesses and consumers to adjust their finances.
'A delay on the implementation date to January 2026 could provide greater policy clarity and administrative readiness, especially if aligned with the Budget 2026 announcement in October.
'This would give stakeholders time to adjust systems, pricing and contractual obligations, while ensuring a more consistent rollout.
'This could help businesses better navigate the combined pressures of SST expansion and the compulsory EPF contributions in October for foreign workers, potentially minimising inflatio­nary pressure,' she said.
To help manage deferred revenue collection if SST is delayed, Foo said the government could manage this by adjusting its fiscal strategies or enhancing other revenue streams until next year.
Economist Carmelo Ferlito said the current planned SST rollout could cause more issues than it solves, especially due to several last-minute announced exemptions.
'A good tax framework needs to be simple and easily understood, but when it is complicated and full of exemptions to navigate, it will likely only add problems rather than act as a solution.
'It seems that what is going on with SST is just adding confusion and therefore compromising its efficiency and creating loopholes that people may be able to exploit,' said Ferlito, who is also Centre for Market Education chief executive officer.
He said the government should introduce controls and limitations on its own spending if it wants to ease the cost of living for the people.
'Taxes do not create inflation. Government spending does,' he added.
Meanwhile, Sunway University economist Prof Dr Yeah Kim Leng said implementing the expanded SST would likely result in slightly higher prices for consumers and businesses.
'With the planned SST implementation exempting most basic items and essential services, the rise in living costs for low and middle-income families should be capped.
'This means the consumer price index should only see a slight uptick, especially with inflation hovering at 1.9%, unemployment remaining low at 3.1% and growth outlook expected to be moderate,' he said.
He added that implementing SST this year would provide the government with a better financial position ahead of a recent global environment fraught with elevated uncertainties.
He said an early SST implementation would likely help to reduce the revenue-expenditure gap for this year, increasing the likelihood of the government achie­ving its 3.8% fiscal deficit target.
'A lower deficit will also result in reduced borrowings, thereby keeping the government's total debts and debt servicing burden in check.
'This improves national fiscal performance, which will then boost investor confidence and shore up the ringgit.
'We must remember that a gradual pace of tax adjustment would always be preferable to a sharp or crisis-driven tax hike,' he added.