Malaysia Moves Closer To Value-Added Tax
November 24, 2009 (Malaysia VAT)
Kuala Lumpur. Malaysia's government will introduce a bill to bring in a goods and services tax in the current sitting of Parliament that ends on Dec. 15, the prime minister said.
The tax, aimed at reducing the government's dependence on revenues from state oil giant Petronas, has been under consideration for years but has been shelved due to political pressure. There was no firm date for its introduction.
"This will allow the public to give their comments, engage them, and if we find it necessary to fine tune it, we'll do so," Prime Minister Najib Razak said during a visit to New York, according to state news agency Bernama. The first reading of the bill does not specify when it would become law and Najib, who is rebuilding political support for the government that has ruled this Southeast Asian country for 52 years pledged that it would be introduced "very gently," according to Bernama.
The National Front government saw its worst results in national and state polls in 2008 and Najib took office in April pledging to liberalize the economy. Malaysia's budget deficit will hit a more than 20-year high of 7.4 percent of gross domestic product this year and Najib has said he will tackle fuel subsidies so as to bring down the deficit to 5.6 percent of GDP in 2010. Petronas accounts for more than 40 percent of government revenue.
The taxpayer base in a country of 28 million people is just 2.3 million individuals and companies. The World Bank said last week that Malaysia must introduce sweeping reforms if it wanted to achieve its goal of becoming a developed nation by 2020.
"To reach the 2020 developed status, the World Bank is proposing a four-pillar strategy," Vikram Nehru, chief economist for East Asia and the Pacific, said.
"Malaysia must specialize the economy further, improve the skills of its workforce, make growth more inclusive and strengthen public finances," he said at the launch of a report on Malaysia. The World Bank said Malaysia's economy would shrink 2.3 percent this year but rebound to a 4.1 percent expansion in 2010.
Nehru said the Southeast Asian economy was on track to grow between 5.6 to 5.9 percent in 2011 and 2012. - Malaysia VAT
"Malaysia's medium-term outlook remains promising but this is conditional on making headway on the structural reform agenda," he said. The report said Malaysia faced the challenge of shifting from an upper-middle economy to a high-income economy.
"This is a difficult challenge, one which only a few countries have met in the post-war period and it requires strong and consistent leadership over a long period of time," Nehru said. Malaysia's ambition of becoming a developed nation has been put in doubt by the economic downturn but the government has said it still has a chance of attaining the goal.
The government has predicted moderate growth of 2 percent to 3 percent in 2010 after a 3 percent contraction in 2009.
Reuters, Agence France-Presse - Malaysia VAT
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