Finally, a Goods and Services Tax for Malaysia: A Comparison to Australia's GST Experience

Abstract

Malaysia had two attempts since 2005 to introduce a consumption tax, and on the third and finally successful attempt, its Goods and Services Tax Act 2014 took effect from April 2015. Similarly, Australia’s path to a broad‑based consumption tax was hard fought, with three attempts to 1981 by then Coalition Treasurer, John Howard. The next proposal in 1985 by Paul Keating as Federal Treasurer failed through lack of internal party support and an unconvincing argument of tax efficiency over regressivity. The 1993 attempt by then Federal Opposition leader, John Hewson had a goods and services tax (GST) on the party platform, but he failed to win over the electorate. Australia’s GST was finally implemented by the Howard Government in 2000.This article concerns an investigation into Malaysia’s recent introduction of a GST and seeks some answers to explain the issues delaying its previous attempts. Australia’s GST experiences from 1985 to 2000 are compared to Malaysia’s delayed introduction of the GST over the period 2005 to 2014 and its implementation in 2015. The focus, in particular, is on two issues underpinning the delays: tax architecture and GST educational support. Comparative data is sourced from academic journals, Malaysia’s mainstream newspapers and online commentaries. Findings suggest that a key factor for Malaysia’s delayed GST includes flawed tax architecture, as income tax rates were pre‑emptively lowered in anticipation of the passage of the second, failed attempt in 2009 at passing a GST Bill through the Malaysian Parliament. By contrast, Australia’s tax architecture was not compromised in the same way as cuts to income tax rates and its new GST regime were legislated concurrently for commencement in 2000. Further, concerns raised by the Malaysian electorate indicate that clearly targeted GST educational programs are necessary for the continuance of effective implementation.