Moody’s sovereign risk group vice-president/senior analyst Anushka Shah said the ratings agency viewed plans to abolish the GST as credit negative if implemented without adjusting measures.
“While revenue losses this year will be offset to some degree by higher oil prices, this development is unlikely to be a structural – or act as – a permanent substitute for GST itself.
“The extent to which offsetting measures – if any – will help to recover the revenue loss from GST will allow us to determine the exact impact on Malaysia’s fiscal position going forward,” she said in a statement today.
Anushka added that the elimination of the GST would increase the government’s reliance on oil-related revenue and narrow the tax base.
Yesterday, the finance ministry said the GST would be zero-rated for all goods and services starting June 1.