Suggest the Factors to Be Considered by the Government Before the Gst Can Be Fully Implemented in Malaysia

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- Affects Small-Medium Enterprise (SME)

Many SMEs are not ready yet for implementing GST. Businesses that have low margins or mainly oriented to export goods or services will also worry that the speed of the refund for input tax. Government should consider this factor before GST can be fully implemented in Malaysia. Additional compliance costs will be imposed by GST for all types of businesses, and it is a burden for some business especially SMEs. In addition, in theory the consumer pay for GST, but in fact sometimes businesses have to pay for GST before they gain money from customers. For example, sometimes a business will pay cash to purchase supplies from suppliers. But once GST is being implemented, this may result in the business needing more financial support to pay the additional cost that imposed by GST. SMEs might easily have cash flow problem compared with large-sized enterprises because the capital of SMEs is limited. Therefore, government should consider this factor by extending the tax return cycle for SMEs as it will help to ease the cash flow burden that borne by SMEs due to GST mechanism. Government might offer low GST rate and high GST rate for SMEs and large enterprises relatively. At the same time, government should also aware that it is difficult for them to administer as some party will intend to have tax evasion.

- Avoid Fraudulent Practices

The current Sales Tax and Service Tax (S&S Tax) are single-staged taxes as it is only imposed once a time for the whole transaction. Unlike the existing S&S Tax, GST is a multi-staged tax in which tax will be charged at every stage of the supply chain of goods or services. In others word, GST is charged on the consumption of goods or services from the top of supply chain, meaning tax charged from manufacturer to wholesaler, wholesaler to retailer and eventually retailer to the end user which is consumer. Ultimately, consumers are the one who need to bear this tax burden. Some people think that GST is a way to cover the leakages and flaws of the current financial position of the government. This is because there is some fraudulent practices will arise among businesses and government officials. For example, some businessman may just increase their price to cover the cost and charge the GST again to increase their company’s revenue. It is kind of fraud to consumer which is unfair to everyone. Government should assign proper person or procedures to monitor the business.

- Lack of Proper Planning

Once the government announced GST will be implemented on 1 April of 2015, every company or the people feel so stress. Ghana implemented Value Added Tax (VAT) just last for three and halfed month in 1995 (The Malaysian Insider, 2014). The main reasons are improper management of public perception, insufficient time for identify the right people, procedures and taxpayers registration, and an unprepared tax administration. These cause the government failed to implement the VAT efficient and effective. Therefore, Malaysia government has to consider every part of management to avoid same things happened again in our country. Another case in Ukraine showed that their GDP increased however the VAT ratio to GDP decreased with a huge number. Supposedly, when GDP grows, VAT will grow too. At the end, they found out there is ineffective tax administration in that country caused the failure happened (The Malaysian Insider, 2014). Government has to enforce the implementing of all those monitoring GST in every company. Thus, proper planning must be one of the factors to consider by government in order to implement GST successfully in Malaysia.

- Political Issue Arises

Government should also consider the political issue that possibly brought by the implementation of GST. The government of Malaysia was now controlled by Barisan Nasional (BN) and the opposed party was Pakatan Rakyat (PR). It is possible for the opposed party to use GST to attack the government. This is because PR believes that the implementation of GST that commenced by BN is not morally at all as it should not been implemented without addressing the systemic corruption and cronyism. Besides, PR also alleged that GST is a new mechanism that used by BN to generate revenues from citizens to the government’s pockets. Therefore, campaigns might be held by PR to oppose the proposed of GST in order to create the awareness of citizens of Malaysia that the GST is not entirely accurate. It is a serious issue that should be considered by government before implement the GST. Arising of the opposition within a country will strongly affect the stability of the country because most of the Malaysians will begin to suspect the actual purpose of government for implementing GST and might join the demonstration that opposing the implementation of GST.

- Led to Bad Economy

Lower profits for companies will lead to have a bad economy in a country. Due to the GST, consumers will think wisely before they spend because they might worry that every single thing that they purchase will be charging GST as well. It will reduce the business transactions within the country. By using the expenditure approach to calculate Gross Domestic Product (GDP) of the country, GDP will go down because consumers will spend less in the market. Local investors and foreign investors might worry about negative GDP growth and thus, they might transfer their money from Malaysia to other country. This will cause the depreciation of Ringgit Malaysia (RM) which will make another crisis of economy happened again. At that time, it will cause the instability of country due to lack of capital. Every production becomes inefficient and ineffective. Therefore, government has to make sure everything is correct in the way.