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Malaysia considers consumption tax reform, possibly reviving GST aspects
🇸🇬 Singapore /Economy & Trade

Malaysia considers consumption tax reform, possibly reviving GST aspects

From CNA · () English

Translated from English, summarized and contextualized by DistantNews.

At a glance

News From a news agency New plan
  • Malaysia's Prime Minister Anwar Ibrahim stated the government is considering reforming its consumption tax system.
  • The reform aims to create a more progressive and efficient tax regime, potentially reintroducing aspects of the Goods and Services Tax (GST).
  • Malaysia previously abolished the GST in 2018 due to public outcry over rising living costs.

Kuala Lumpur: Malaysian Prime Minister Anwar Ibrahim announced that the government is exploring reforms to its consumption tax regime, aiming for a more progressive and efficient system. This consideration includes the potential reintroduction of elements from the Goods and Services Tax (GST), which was previously scrapped.

Malaysia abolished the 6% GST in 2018 following widespread public opposition fueled by concerns over increasing living costs. It was replaced by a narrower sales and services tax (SST). Some analysts have advocated for the GST's return to help the government meet its fiscal objectives.

Anwar, who also serves as finance minister, acknowledged the GST's transparency and efficiency but expressed reservations about its impact on the poorest segments of society. He indicated that the current SST regime has systemic weaknesses that necessitate a change, though he did not elaborate on these details.

So we need to see how we can combine these two systems to find a new way to determine a more progressive and efficient taxation system.

— Anwar IbrahimExplaining the need for tax reform.

"So we need to see how we can combine these two systems to find a new way to determine a more progressive and efficient taxation system," Anwar stated at a finance ministry event. He described the task as a "major challenge" complicated by rising poverty and living costs.

Previously, in 2024, the government had stated no plans to reintroduce the GST as an alternative to removing fuel subsidies. The country has been moving towards a targeted aid system, including introducing quotas for subsidized RON95 transport fuel last year. The finance ministry reported that targeted subsidies have yielded approximately 15.5 billion ringgit (US$3.8 billion) in annual savings, helping to offset a growing subsidy bill due to higher energy prices linked to the conflict in the Middle East. The government is scheduled to present its 2027 budget on October 9, focusing on areas such as reducing regional development gaps, addressing cost-of-living pressures, and boosting investment.

It is a major challenge, it has to be done. But it is not simple ... with rising poverty rates and rising costs of living.

— Anwar IbrahimDescribing the difficulties in implementing tax reform.
DistantNews Editorial

Originally published by CNA in English. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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