KUALA LUMPUR: There is an urgent need for Malaysia to introduce a new tax base system to increase revenue, without solely relying on reimplementing the Goods and Services Tax (GST).

The World Bank lead economist for Malaysia Dr Apurva Sanghi said GST was one instrument the government might opt to generate more revenue. But other avenues such as personal income tax could also be used.

"It has been a matter of urgency (to introduce new taxes) for a number of years due to declining (government) revenue. the pressure has been building for 10-odd years.

"How soon should this happen? It is a political question but I do believe that this government, like the previous government, is aware of the urgency," he said at a briefing on the World Bank's Malaysia Economic Monitor report today.

Apurva said the country's personal income tax had not been utilised at its optimum.

"If you look at the tax relief that is in the personal income tax framework, it is not very helpful. The threshold is so high and needs to be lowered so more people should pay taxes.

"There are other instruments that can help mobilise revenue instead of just GST. Subsidy rationalisation could also save the government a lot of money," he added.

As for the upsides of GST, Sanghi referred to the tax as a "lean and mean machine" that could mobilise revenue.

Another benefit of GST that has not been spoken about often is that it can also lead to a "clean" government.

"If you want to have a clean government, GST is the way to go because the chances of leakages and corruption to go down will be significantly more.

"But the downside of GST is that it is not progressive but is aggressive. However, there is enough experience out there that Malaysia can adopt and it can also learn from its own prior GST implementation," he said.

On the 2023 Budget 2023 scheduled to be re-tabled on Feb 24, Sanghi expects it to be based on current and domestic situations.

He noted that there had been significant changes in the global and domestic economies from when the last budget was announced in October.

One of the changes is inflationary landscape.

"We will have a more up-to-date analysis and policy measures. Beyond that, I think even if it is a new government, you would expect that this budget would adhere to the 12th Malaysia Plan," he said.

https://www.nst.com.my/business/2023/02/876645/world-bank-gst-not-only-option