Wednesday, October 12, 2011

UHY: GST crucial to increase govt revenue, cut fiscal deficit

KUALA LUMPUR: Accounting and consulting network UHY says the government must impose the goods and services tax (GST) to increase the revenue while cushioning budgetary deficits.

UHY Malaysia senior partner Alvin Tee said the RM232.8 billion allocation under the 2012 Budget proposals with a lower deficit 'is clearly an arduous task for the government to fund'.

He said on Wednesday, Oct 12 certain proposals in the Budget might not eventually be fully implemented due to the lack of funding.

Under the Budget proposals announced last'' Friday, Oct 7, the government projects the economic growth to pick up in 2012, with GDP expanding between 5% and 6%. It targets overall deficit to GDP to shrink to 4.7% in 2012 from 5.2% in 2011.

However, Lee said it was widely anticipated by observers the Budget sidestepped talk of any implementation timeframe for GST.

'While the concept enshrined by our PM's call for Malaysia to strive towards a high income nation via the ETP (Economic Transformation Program) should by now be well entrenched in the mindsets of the Rakyat, further reading of the ETP indicates an SRI (Strategic Reform Initiative) that lists Public Finance reform as an integral component of the ETP.

'Introduction of GST, to the country is an initiative listed in the Public Finance SRI and should be undertaken as soon as possible,' Tee said.

He said the GST, being a broad based consumption tax, has been a major tool for governments around the world to collect further revenue, while cushioning budgetary deficits.

He said according to PEMANDU, the agency behind the ETP estimates additional RM6 billion in government revenue over the first two years of implementation.

'GST is an equitable system as compared to the sales and service tax regime where input credits are not given. In countries that have introduced GST, it forms the major part of their government's tax revenue,' he said.

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