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Existing Taxation Model Unsustainable, Says Titiwangsa MP, Johari

The former second finance minister warns that Malaysia will accumulate ‘uncontrollable debt’ if measures are not implemented to improve tax collection

The current taxation model is unsustainable and could see the country accumulate “uncontrollable debt” if mitigation measures are not implemented, says former second finance minister Datuk Seri Johari Abdul Ghani.

Johari (BN-Titiwangsa) told the Dewan Rakyat he was concerned about the sustainability of the taxation model when taking into account the amount of interest for loans and other expenditures the government had to bear.
He said neighbouring countries in Asean had on average a higher percentage of tax collected compared to their gross domestic product (GDP).

“For example, the tax collected by the government in Thailand amounts to 14.1% of the GDP, in Singapore 13% and Vietnam 22.7%.

He asked the ministry to explain whether Malaysia’s tax collection model was comparable to its Asean neighbours and if the government could ensure that it did not continue to accumulate debt.

In his response, deputy finance minister Ahmad Maslan agreed that the current taxation model, with tax revenue at an average rate of 11.5% of the GDP between 2018 and this year, was unsustainable.

He said although tax revenue was a significant contributor to the total revenue collected by the government last year, at RM208.8 billion out of RM294.4 billion (70.9%), it only amounted to 11.7% of the GDP.

“The tax revenue is expected to remain at 11.6% of the GDP this year,” he said.

Ahmad said one of the measures Putrajaya was looking at to resolve the issue was targeted subsidies, which he said had already begun with electricity in January.

He said the government was also working on a targeted subsidy mechanism for diesel, with a proposal expected to be completed in the second quarter of the year.

“We want to expand the tax revenue base, improve the tax structure and legislation, as well as provide tax incentives,” he said.

Ahmad said Putrajaya had also implemented a medium-term revenue strategy for the next three years. He said a fiscal responsibility Act would be tabled in Parliament this year as another measure to resolve the government’s increasing debt. – FMT/BACALAHMALAYSIA.MY

BacalahMalaysia Team

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