Why is Malaysia lagging behind neighbours in GST adoption?

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Malaysia Lags Behind Neighbours in GST Adoption Due to Outdated Taxation System

Malaysia is significantly behind regional neighbours such as Laos and Cambodia in adopting a Goods and Services Tax (GST) system, placing it among the last 20 per cent of countries globally that have not yet implemented such a framework. This delay stems from an outdated, inefficient, and non-transparent current taxation structure. The existing system imposes a double taxation burden, comprising a 10 per cent sales tax and a 6 per cent service tax, which contrasts with the single-tier nature of a GST. The opacity of the current regime can lead to tax duplications that are absorbed into product prices without explicit itemisation on receipts.
Current Taxation System's Inefficiencies

The existing tax framework in Malaysia is characterised by inherent weaknesses that hinder both transparency and efficiency. A primary issue is the imposition of multiple taxes, specifically a 10 per cent sales tax combined with a 6 per cent service tax, which results in a form of double taxation for consumers. In contrast, a GST system consolidates these into a single, unified tax.
Lack of Transparency and Tax Duplication

The opacity of Malaysia's current taxation system allows for instances where taxes on sales and goods can be duplicated without clear identification. This lack of clarity means that retailers may not readily perceive these multiple tax layers, as they are integrated into the final product's price. Furthermore, these embedded taxes are not itemised on receipts, leading consumers to accept them without deeper scrutiny.
Regional and Global Comparison

Globally, over 170 countries have adopted some form of GST, highlighting Malaysia's position as an outlier. The fact that nations like Laos and Cambodia have already implemented GST underscores Malaysia's lagging status in modernising its revenue collection mechanisms. This delay places the nation in a less competitive position regarding fiscal efficiency compared to its regional peers.

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Why is Malaysia lagging behind neighbours in GST adoption?

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