KUALA LUMPUR: The GST, according to two Malaysian MPs, has a potentially negative impact on charities and non-profit organizations.
The government, they said, should immediately consider deferring the implementation of the GST until “we become a mature, high-income economy with proper government funding structures for NGOs and charities”.
“However, if the GST is going to be implemented anyway, organisations currently enjoying tax-exempt status should, as a matter of principle, also be exempted from GST treatment,” said Steven Sim Chee Keong and Zairil Khir Johari, the MPs for Bukit Mertajam and Bukit Bendera respectively in a joint statement.
Again, if the government is unable to exempt charities from GST for whatever reasons, they pleaded, then it should increase the taxable turnover threshold for GST-exempted charities and non-profits to at least RM2 million from the current RM500,000. “This will help to relieve smaller charities from some of the negative consequences.”
The MPs cited from the Royal Malaysian Customs’ Goods and Services Tax: Guide on Societies and Similar Organizations booklet, which states that almost all activities carried out by charities, non-profit organisations and NGOs – including those currently enjoying tax-exempt status – will be subject to GST.
As government support is often lacking, added the duo, most charities cannot afford to wait passively for donations. “Instead, active fundraising is required, sometimes via ‘business-like’ activities, such as selling merchandise and providing services such as the rental of halls.”
Some non-profits actually sustain themselves through a cross-subsidy model where profits earned from business activities are used to cross-subsidize the disadvantaged, continued the statement. “For example, a dialysis centre may charge commercial rates to patients who can afford it in order to cross-subsidize those who cannot.”
While it is important that the government ensures no profiteering occurs behind the facade of charity, the statement conceded, “genuine charities must be assisted and should not be burdened unnecessarily”.
In this respect, the government should consider creating certain categories of non-profit organizations or charities that are exempted from GST altogether, the duo stressed.
