KUALA LUMPUR: The provision of services will be taxed at 6% under the reintroduced sales and services tax (SST), while the sales of goods will incur a 10% tax, said Finance Minister Lim Guan Eng.
He said the SST bill is expected to be passed in August during the current parliamentary seating and would be implemented in September.
“The SST will be reintroduced on Sept 1, and bring in a projected revenue of RM4 billion,” he said at the launch of the National Tax Conference 2018 here today.
He said the SST, coupled with rising crude oil prices and extra dividend from government-linked companies, would bring in an extra RM14.4 billion revenue for the government to compensate for the loss of RM21 billion revenue from the zero-rating of the goods and services tax (GST) from June this year.
“To fill the gap left by the GST, the ministry has identified RM10 billion worth of expenditure savings,” he said.
He said these measures include downsizing and abolishing overlapping and non-urgent programmes, and cancelling or deferring certain exorbitantly priced mega projects.
He added that among the results is the RM15 billion, or 47%, reduction to the final cost of light rail transit 3 (LRT 3) projects by cancelling or postponing both excess capacity and physical features.
Lim said taxes, apart from funding the development and administration of the country, also function to correct economic inequality that exists in the society by redistributing income.
He said while the purposes of tax have remained largely the same over the years, its sources and collection methods and the challenges associated with collecting it have changed.
“It is now tougher to get the right tax amount with the advent of non-traditional business models and blurry legal jurisdictions covering various transactions,” he said.
Nevertheless, he said the Inland Revenue Board (LHDNM) would use a rules-based approach in collecting taxes and stop raids using gun-toting security personnel.
“Now, LHDNM is adhering to the rule of law by conducting desk audits instead,” he said.
He said LHDNM might want to have early discussions with taxpayers and tax practitioners on certain issues so that any dispute could be resolved in a timely manner without resorting to lengthy and cumbersome paper correspondences.
“Not only will these early discussions prove to be time-saving, but they will also encourage greater transparency and co-operation between the parties involved,” he said.
He said LHDNM must also adopt and adapt to new business transformations.
“Technology today allows us to not only collect routine data from the filing of taxes, but also provides us with an avenue to gain better insight and understanding into taxpayers' behaviour, and potentially shape a fairer and more responsive tax regime,” he said.
Lim also said LHDNM needs to work closely with international bodies in order to address international tax issues, including the digital economy, the sharing economy, newer transaction modes involving virtual currencies as well as the storing of business records and financial data in virtual data rooms.
He said multinational companies operating across multiple national jurisdictions have reaped the maximum possible economic advantage via aggressive tax planning.
“The Malaysian tax authority must stand guard against any loophole manipulated through global tax planning by these multinationals,” he said.
In this regard, he said Malaysia has an ongoing commitment as an associate member of the Organisation for Economic Co-operation and Development's Inclusive Framework, which it joined in March last year, as part of the global effort to counter issues relating to base erosion and profit-shifting.
He said Malaysia is also committed to implementing the Automatic Exchange of Financial Accounts Information under the Common Reporting Standards (CRS), where participating countries would exchange information on financial accounts of non-residents.
To date, he said 100 jurisdictions have agreed to exchange CRS information.
Meanwhile, on 1Malaysia Development Bhd (1MDB), Lim said the government would honour the payment of 1MDB'S RM1.3 billion debt to various creditors scheduled by the end of this year and would not let the payment to default.
“We have to find the money, by hook or by crook, to pay because we will not allow Malaysia to go into default,” he said.
He added that the RM1.3 billion payment is on top of the RM7 billion already paid to date. — Bernama