KUALA LUMPUR (March 26): The rise in the service tax from 6% to 8% would only have a minimal impact on inflation, estimated at 0.2 percentage points, owing to its limited scope, which exempts essential services and basic necessities, says Prime Minister Datuk Seri Anwar Ibrahim.
Anwar said that the increased service tax rate, effective March 1, 2024, primarily affects discretionary services and business-to-business transactions, sparing direct consumer activities.
"In specific sectors such as food, beverages and telecommunications, a 6% tax rate remains. The government has also implemented measures to mitigate double taxation, especially within the logistics sector, demonstrating a balanced expansion of the revenue base with consideration for citizens’ interests," Anwar said during the prime minister’s question time in Dewan Rakyat on Tuesday, in response to inquiries from Datuk Mohd Shahar Abdullah (BN-Paya Besar).
Anwar reiterated that the service tax applies to a limited scope, covering just over 41% of available services in the economy, with approximately 60,000 registered service providers under the Royal Malaysian Customs Department.
With the widened scope and revised service tax rate, Anwar expressed the government’s anticipation of collecting RM3 billion in revenue.
Regarding the capital gains tax (CGT), Anwar clarified that its application is solely on companies dealing with unlisted shares, and is expected to generate RM800 million without directly impacting citizens or living costs.
"The government adopts a progressive approach, aiming to increase tax revenue from those with greater capacity, while ensuring minimal burden on the majority," Anwar emphasised.
Responding to a supplementary question from Mohd Shahar, Anwar concurred on the need to intensify efforts to transform government-linked investment companies (GLICs) to boost domestic investment.
Anwar noted that investment income receipts, including dividends from Petroliam Nasional Bhd (Petronas) and Khazanah Nasional Bhd, accounted for 60.5% of non-tax revenue in 2023.
"With increased domestic investment, we aim to enhance non-tax revenue, making it a significant source of government income," Anwar added.
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