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Official Statements
Last Updated : 15/2/2013 23:01

Extract of Budget Speech 2010

Strengthening Management of Government Finance

The Government is currently at the final stage of completing the study on the implementation of goods and services tax (GST), particularly to identify the social impact of GST to the rakyat. The purpose of this study is to ensure that if GST needs to be implemented to stabilize Government finance, it will not burden the rakyat. If the Government implements GST, it will replace the current sales tax and service tax as well as exemption will be granted to the low-income group. The GST rate to be imposed will be lower than the current sales tax and service tax rates.

YAB Dato' Sri Mohd Najib Tun Abdul Razak
Prime Minister of Malaysia
Cum Minister of Finance Malaysia
23 October 2009

Extract of Budget Speech 2005

Review of Taxation System

The Government will continue to ensure the taxation system is more efficient, equitable and business friendly, as well as capable of generating a stable source of revenue. Towards this end, the Government proposes to establish a Taxation System Review Panel comprising representatives from the public and private sectors. This Panel will review the tax system, including the provisions of the Income Tax Act 1967. The focus of this review is to ensure that tax provisions remain relevant. Existing provisions will be amended to improve clarity and transparency of tax administration.

Another aspect of taxation which will be reviewed is the consumption tax. The consumption tax, in its present form, consists of sales tax and service tax. Sales tax is levied on goods at the point of import or at the manufacturer's level. Service tax, on the other hand, is imposed on selected services, including those provided by professionals, as well as operators of hotels and restaurants. The Government proposes to replace both these taxes with a single consumption tax, known as the Goods and Services Tax (GST), will be more comprehensive, efficient, transparent and effective, thereby enhancing tax compliance. Given that, under the new system, companies need to keep orderly accounts, the Government's revenue collection is also expected to increase.

The Government proposes to implement this new tax on 1 January 2007. The introduction of the new tax will provide the Government with the opportunity to reduce corporate and individual income tax rates. The Government will also ensure that the low-income group will not be burdened by the implementation of GST. In this regard, goods and services considered as basic needs will either be zero-rated or exempted. In addition, small businesses will also be exempted from this tax.The Government will provide opportunities for public and private organizations to participate in the discussions toward the implementation of GST.

YAB Dato' Seri Abdullah bin Ahmad Badawi
Prime Minister of Malaysia
Cum Minister of Finance Malaysia
10 September 2004

Extract of Budget Speech 1993

Integration of the Existing Taxes on Consumption

The structure of the present consumption taxes contains several weaknesses that make it inefficient. Furthermore, the revenue yield does not commensurate with the growth in the economy. I therefore intent to integrate and restructure the existing sales and service taxes into a consolidated tax to be called the Sales and Service Tax or SST. This integration will help overcome several weaknesses such as tax pyramiding, transfer pricing, bias towards imports and other abuses. As this tax is imposed on consumption, and not on capital, it will stimulate greater savings and investments.

This tax will not burden the lower income groups. Several essential goods and services as well as small businesses will be exempted from the tax. The rate of the proposed SST will be below 10% which is lower than the existing rate of Sales Tax. However, before this proposal is implemented, the Ministry of Finance will consult all relevant parties. This is necessary in order to avoid any possible misunderstanding that this proposal is merely based on the reforms of other countries. We must be convinced that our tax system is efficient and appropriate for us. However, we will continue to introduce changes to make it more relevant to our needs. Meanwhile, the administrative machinery of the Royal Custom and Excise Department will be strengthened and modified to increase its efficiency accountability and ability to cope with additional responsibilities.

YB Dato' Seri Anwar Ibrahim
Minister of Finance Malaysia
30 October 1992

Extract of Budget Speech 1989

Value Added Tax (VAT)

The reduction in direct taxes I am proposing will lead to substantial losses in revenue, and with the increases in expenditure, there is no other alternative but to strengthen our sources of revenue. In this context the sales tax in its existing form is limited in scope and has a number of inherent weaknesses which has resulted in the Government losing revenue. To overcome such weaknesses, there is merit in considering a Value Added Tax (VAT), which is a broad-based and equitable tax and which, in fact, has been adopted by some 39 countries. The rate and scope of the tax can be structured in such a way that it does not have a major impact on prices of consumer goods. Specific provisions can also be made to ensure that the lower income groups and small scale enterprises are not adversely affected by the tax. However, there are implications related to a VAT which need to be studied further before it can replace the existing sales tax.

YB Tun Daim Zainuddin
Minister of Finance Malaysia
21 October 1988

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