KUALA LUMPUR: Some 65% of the additional RM20bil income from the goods and services tax (GST) implementation over the past one-and-a-half years came from taxes imposed on imported goods and services, said Finance Minister II Datuk Johari Abdul Ghani. This proves that the introduction of the GST has been a success in addressing the inefficiencies of the previous taxation structure, he said.
“The previous sales and service tax was not efficient and some businesses did not pay tax to the Government. Note that from the additional RM20bil in income, we are actually collecting from the same companies and business entities. Now they have no choice but to declare the products,” he said on the sidelines of the 21st Malaysian Capital Market Summit here yesterday.
According to Johari, the Government has collected around RM38bil in GST income since its implementation in April 2014.
“You need to allow the system to prove itself over the next two to three years. I think that when it is fully absorbed, you will see the benefits of the GST and businesses will also become more competitive,” he said. He cited the GST and subsidy rationalisation as prime examples of the Government’s efforts to improve its fiscal position, which, in turn, will be beneficial for the rakyat in the long run. In his keynote speech, he also highlighted the importance of capital markets as an impetus for the nation’s growth.
He admitted that there was room for growth, especially in the country’s bond markets. Although Malaysia’s currency denominated bond market is the third largest in Asia next to Japan and South Korea, the retail participation is still very low.
“The difference is that their bond markets are active due to a strong retail presence. Our market is good too but the retail part is not there yet. I think this is because of our high interest rates. For most, they feel like it is better to save,” he said.
Malaysia’s capital market, encompassing various asset classes and financial instruments, is valued at RM2.9 trillion, or the equivalent of 2.3 times the country’s gross domestic product. Aside from its bond market, which is known by the success of its sukuk industry, the country’s equity market carries a market capitalisation of RM1.7 trillion, or one of the highest in the region.
Johari credited the success of Malaysia’s capital market to the reform initiatives by the Securities Commission, Bank Negara and the finance industry as among the major factors. In spite of the uncertain global economic environment, Malaysian businesses have raised a record RM485bil over the past five years, supporting the nation’s growth and infrastructure needs, he noted.
