THE 8% sales and service tax would not have a large impact on consumers, economists said. 

They said this was because the tax would not be imposed on food, drink, and telecommunications, which are considered essential items and services. 

In his Budget 2024 speech on Friday, Prime Minister Anwar Ibrahim said the government would expand the scope of taxable services to include logistics, brokerage, and underwriting. 

High-value goods tax was increased from 5% to 10% on certain items such as jewellery and watches. 

Prof Barjoyai Bardai of Universiti Tun Abdul Razak predicted that transport and delivery services would be affected by the increase. 

He, however, said it would be tolerable for consumers. 

“Take food delivery, for example. The delivery service won’t be excluded from the tax. There would be a price hike there. 

“But the impact is not going to be much. This tax is not the main source of income for the government; it is looking at around RM1 billion only from this,” said the academic. 

Asked if prices of goods would increase, Barjoyai believed it was inevitable. 

“There are some traders who have already warned that prices may go up. Those in the transport sector may increase their rates as well,” he said. 

Ahmed Razman Abdul Latif of Putra Business School said the impact would be minimal. 

“We are still waiting for the list of items or services that are going to be taxed under the new 8% rate.” 

Razman said it would significantly impact consumers only if daily needs were included. 

“I think we will see a price hike when we send out cars to service centres or when we decide to renovate our homes. 

“But that is not something we do every day. The impact is there for us, but it would be minimal,” he said. 

Federation of Malaysian Consumers Association deputy secretary-general Nor Asyikin Aminudin concurred. 

“The public will not be affected much because our daily needs such as food and beverages are not taxed. I’m not saying there is no impact, but I feel it will be minimal,” she said.  

“The tax is going to be on things that you don’t purchase daily,” she added. 

The goods and services tax (GST) was abolished on August 31, 2018 and replaced with the sales and services tax on September 1, 2018. 

MCA spokesperson Saw Yee Fung, however, disagreed with the government’s move to increase the SST, saying Budget 2024 failed to heed public opinion to reinstate the GST. 

Saw said while the current tax rate in the country was lower than that of neighbouring Singapore and Thailand, opting to increase the rate of SST was akin to prescribing the wrong medicine for an ailment. 

“The GST is universally recognised as a tax system that is more transparent, fair, and with a broader tax base. 

“Unfortunately, the government has ignored the requests from the business community, associations, and the public, and remains unwilling to reintroduce the GST. 

“Although the government has exempted food, beverages, and telecommunications from the 2% SST spike, consumers are still confronted with daily necessities such as credit cards, insurance, medical care, logistics, e-hailing, air tickets, accommodation, broadband, and professional services such as legal consultation and accounting. 

“All aspects of daily life will be affected. Hence, it is incomprehensible that the financial burden on people will not increase as the prime minister claims,” said Saw in a statement. 

Saw said increasing the SST rate is a “punishment” against individuals who pay their taxes regularly and on time. 

She added, compared with the GST, the biggest disadvantage of the SST is that it could not effectively curb tax evasion. 

“Usually, the M40 will have to bear the weight of these additional financial burdens, since the B40 consumes far less in these areas. 

“Meanwhile, the purchasing power of the T20 is relatively higher. Hence, it is the M40 who are most affected in the end.” 

She said with the continuous plunge of the ringgit and the long-standing dilemma of inflation, the government should restructure taxation instead of blindly hiking tax rates to increase national revenue. 

Putrajaya’s move to raise the SST percentage has emboldened tax dodgers to find other ways of evading taxes, she said. 

Ultimately, regular taxpayers would continue to be squeezed, she added. – October 18, 2023.