Will GST or VAT ever be implemented?

DAP National Deputy Chairman and MP for Kepong Dr Tan Seng Giaw calls on the Government to step up the education process of making the people understand the proposed Goods and Services Tax (GST) or Value-Added Tax (VAT) and other measures to modernize our tax system.

On 21 February, 2006, the Government postponed the implementation of GST until further notice. Dr Tan believes that this procrastination reflects the relative lack of effective planning, infrastructure and public education on the outdated tax system in general and GST in particular. That business is sluggish is an important factor in the postponement.

The Finance Ministry and The Inland Revenue Board(IRB) are still too preoccupied with the mentality of direct tax. The concept of indirect tax such as GST takes time to sink in. Our neighbours such as Singapore and Thailand have had VAT for some years.

Nearly 20 years ago, the then Finance Minister Tun Daim mentioned VAT in one of his budgets. For some reasons, the subject had been dropped until the 2005 budget at the end of 2004. We have been reminding the Minister and IRB that there have not been adequate education of the public on GST and that the details of the tax are scarcely known.

Now, the ministry says that GST will not be implemented on 1 January, 2007 as initially scheduled, to refine further the proposed model and to ensure that businesses are ready to implement the new system.

Granted, the Government sets up a tax review panel on GST and has consultations with certain people. We can see that infrastructure and education are inadequate. Is Customs able to cope? Will it and IRB be handling those who claim exemption from GST, say at the Kuala Lumpur International Airport (KLIA), professionally?

In the modern world, there will be more indirect taxes such as GST. The Government dithers. Despite the forecast of continued economic growth, business is not good. Delaying the implementation of GST is inevitable.