Verinderjeet Singh, vice-chair of the ICC Global Tax Commission, said a publicly available fiscal plan would prevent a “collection headache” for the customs department.
On Jan 5, economist Geoffrey Williams called on the government to scrap the online sales tax on LVG, calling it difficult to implement and estimating that the government would only collect RM200 million each year from it.
Williams urged the government to instead carry out a full review of the tax system, saying that it was currently full of “ad hoc” levies that were inefficient in raising revenue.
Veerinderjeet, however, defended the principle of the LVG tax, which is used to level the playing field for local businesses. He said neighbouring countries, such as Australia, had implemented similar taxes for the same reason.
“The bigger picture is (that the government) decided, and correctly so, to create a level playing field.
“We cannot allow (online) trading to be freed from this tax. If you’re buying from a (physical) shop a RM300 to RM400 item, you end up paying the sales tax as well,” he added.
He nevertheless agreed with Williams about the collection headache, saying the customs department would not be able to ensure that all foreign online sellers register themselves with the Malaysian government, and that retaining untaxed goods in customs depots would cause problems for consumers.
“When the customs authority widens the scope of the tax, it should understand business and be prepared to ensure it has covered all corners… that’s an administrative issue the authorities need to resolve,” he said.
Transparency in fiscal planning
Veerinderjeet said that hastily imposing new taxes would give the public the impression that the finance ministry acted through “knee-jerk reactions” and made changes when politicians pushed certain ideas.
“The impression we have (now) is that there’s no long-term plan and we are moving along over time, and if the government sees an opportunity, or when the economy is improving, then you say: ‘Oh, let’s think about wealth tax’.
“That kind of approach can be called ad hoc. What we are saying is: with a five- to 10-year plan – whether it is eventually the goods and services tax or a wealth tax – consider when you think it should be introduced and have an open discussion with all stakeholders to get their views,” he said.
Veerinderjeet added that engagement with stakeholders would help iron out potential challenges in the implementation process and prevent companies from getting caught by surprise.
He also said the fiscal roadmap should be designed along the projected growth in GDP to obtain a realistic picture of how to widen the scope of tax coverage and increase revenue.
Meanwhile, Amarjeet Singh of Ernst & Young said active engagement with the industry before introducing new taxes was “crucial” because different stakeholders had their own “peculiarities” in daily operations.
“There are two things: whether the proposed tax can achieve its original objectives, and whether it is (about) equity or raising revenue.
“Next, whether it can be introduced in a manner that will not disrupt existing businesses, which is easier said than done.
“The more we engage, the better (it) will become,” Amarjeet told FMT.