KUALA LUMPUR: The government needs to be careful in its operating expenditure until this December, following the abolition of the Goods and Services Tax (GST).
At the same time, the people should also be encourage, especially traders to pay their taxes when the Sales and Service Tax (SST) kicks in from September 1, onwards.
Association of Malaysian Tax Accountants (MATA), president, Datuk Abd Aziz Abu Bakar, said the repealing of the GST has resulted in the government experiencing a RM13 billion revenue deficit.
He said based on the 2018 Economic Report, the government's total revenue forecast this year was forecast to be RM240 billion, direct taxation contributing RM128 billion, indirect taxation contributing RM64 billion and remainder coming from non-tax revenue as well as borrowings and use of government assets.
He said from the RM64 billion, RM44 billion was to be collected through the GST, which from January to May, saw RM18 billion in revenue.
"However, when the government set the GST at zero rated from May to August, the government lost a RM18 billion in revenue.
The government is expected to collect RM7 Billion from the SST for the period between Sept 1 and until end of the year.
As there will be no GST revenue between May and August, this means the government would collect RM25 billion from both the GST and SST for this year.
“From this, the government would face a revenue deficit of RM18 billion. The operating expenditure of RM234 billion includes emoluments of RM79 billion, retirement (RM24 billion), debt service (RM31 billion), supply and services (RM34 billion) and social assistance (RM27 billion ), "he told NSTP.
The Dewan Rakyat had this month passed the Sales Tax Bill, Service Tax Bill as well as repealing the Goods and Services Tax Act.
The Pakatan Harapan government has committed in implementing its 14th General Election manifesto pledges including the repeal of the GST after defeating the Barisan Nasional (BN) in the May 9 polls.
The GST was implemented by the BN on April 1, 2015 at a rate of 6 per cent.
Aziz said the deficit rate in the 2018 Financial Report was forecast at 2.8 per cent.
However after a three month tax holiday as well as the SST being implemented, the deficit rate is expected to touch four per cent, he said.
"If the government's account sees negative results, we may have to borrow and this does not look good for the government. As such the government needs to be careful with its operating expenditure.
"The government has to spend prudently and ensure that it continues with operating expenditure. The managing expenditure should also continue, the government should not reduce the salaries and must continue paying the debts it owes," he said.
Meanwhile, Aziz said the implementation of the SST also raises the spectre of the people not paying their taxes and could lead to the formation of a of a ‘black economy’ atmosphere.
He said the government's advice to the Inland Revenue Board to adopt a "soft" approach on taxpayers such as removing restrictions of traveling abroad if they do not pay their taxes also poses a risk it’s tax collection.
“As such, it is essential for the government to encourage the people to be disciplined in paying their taxes,” he said.
Touching on the implementation of the SST which is meant to reduce of the cost of living, Aziz said the impact would not be seen in the short term.
Instead, he said it is expected to be seen only two months after its implementation because the price of goods are not likely to see a drastic decrease in the short term.
“We cannot expect to see drastic drop of goods price on Sept 1. We have look at in a month or two.
“We have to remember that the government’s move to implement the SST is to reduce the people’s cost of living, as such the government will ensure that it will take place.
“When the price of goods see a drop, the cost of living are also expected to see a drop. The cost of transportation, education
and medical treatment will likely to see a reduction. We have to wait for the feedback from the people and be fair to the government.
“This means, enforcement should be undertaken to ensure traders do not hike up cost, as during the SST era, the cost of goods will be reduced, resulting in cost of living seeing a drop.
Meanwhile, Universiti Putra Malaysia's Putra Business School (UPM) president and CEO Dr Zulkornain Yusop said the implementation of the SST requires the government to strictly enforce the law to prevent traders from absconding to their taxes.
He said the government’s enforcement aspects should also be enhanced to control the rise in prices of goods.
"Otherwise, the hope of helping the people would be tough to achive and would tarnish the government’s image,” he said. © New Straits Times Press (M) Bhd