Abstract
Companies require a comprehensive plan and controls to support the business operations and revenue management best practises that may influence the operating performance (profitability and liquidity position) during the Goods and Services Tax (GST) and Sales and Services Tax (SST) periods. This paper applied two- sample t-test to analyse the operating performance the profitability and liquidity position for 249 listed companies from manufacturing and service sectors during the GST and SST periods. As a result, the GST has a positive impact on company profitability, whereas the SST has a slightly greater effect on the company liquidity position. In addition, the analysis on three main sectors operating performance results has similar findings with the main analysis where the profitability performance is better in the GST period while liquidity position increases in the SST period. Furthermore, the outcome of the operating performance analysis by company size reveals that small companies perform less successfully than expected for the profitability and liquidity position relative to large companies during the GST and SST periods. In spite of the fact that SST period outperforms the liquidity position for the companies; the companies still have high profitability and a manageable liquidity position during the GST era. This reveals that GST positively influences the operating performance of the companies from the perspective of effective revenue and short-term fund management. The outcome of this study provides a novel contribution to the business leaders, authorities and academics on the effect of two indirect taxes GST and SST on the companies operating performance.
Highlights
On 1 September 2018, Malaysia eliminates goods and services tax (GST) and reintroduce sales and services tax (SST) after the newly formed government (Alliance of Hope) decided to switch GST to SST [1]
We discover that the company’s profitability is higher during the GST period compared to the SST period
The liquidity position of the companies is marginally better during the SST period relative to GST period
Summary
On 1 September 2018, Malaysia eliminates goods and services tax (GST) and reintroduce sales and services tax (SST) after the newly formed government (Alliance of Hope) decided to switch GST to SST [1]. The GST was introduced in 2015 with purpose to increase income and reduce the country's budget deficit and replaced with SST projected to reduce living costs, for the lower and middle income group [1]. This reflects that SST has positive impact to short-term fund management whereas GST possible to provide positive influence to revenue management and profitability. The GST is charged on the value-added to goods or services for each separate processor in the manufacturing and distribution chain [4] This raised questions on how the taxable manufacturer or service sectors managed the business processes during the implementation of GST or SST. Does the implementation of GST and SST influence the operating performance of the companies?
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