experiences and learnings from introducing gst in malaysia

ENHANCING EFFICIENCY IN TAX ADMINISTRATION

Experiences and Learnings from Introducing GST in Malaysia

FAIZULNUDIN BIN HASHIM

SENIOR ASSISTANT DIRECTOR OF CUSTOMS

[email protected]

+60388822845

ROYAL MALAYSIAN CUSTOMS DEPARTMENT

1

ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE 2

32 years toward GST - How we got there

2014

GST BILL PASSED –

127 TO 78

ENHANCING EFFICIENCY IN TAX ADMINISTRATION13TH ATAIC ANNUAL TECHNICAL CONFERENCE

EXEMPTION AND ZERO RATING OF BASIC NECESSITIES AND CRITICAL

SECTORS

ADVANTAGES

•easier to convince the critics

•potential progressivity

DISADVANTAGES

•zero rating and exemptions enjoyed by everyone

•complexity

•compliance cost

•low productivity

Designing the GST model


38.8

22.2

9.4

27.5

22.7

18.7

4.2

13.7

27.8

5.0

20.0

40.0

%

Food and non-

alcoholic beverages

Housing & Utilities

Transport

Low income Medium incomeHigh income

Source:

Household Expenditure Survey

Department of Statistics

4

CONSUMPTION PATTERN OF MALAYSIA


MALAYSIAN GST MODEL

• Rate = 6% (one single rate)

• Threshold = RM500,000 (for all types of businesses)

• Zero-rated supplies

• Exempt supplies

• Foodstuff

• Agriculture products

• Livestock

• Poultry & eggs

• Seafood

• Supply of the first 300 units of

electricity for domestic use

• Supply of treated water for

domestic use

• Exported goods and services

• Land for general use

• Agriculture land

• Residential property

• Highway toll

• Funeral, burial or

cremation

• Private health & education

services / child care

• Rights to use Land

• Financial services

• Public transport (land & water

mode)


It was a great success despite many challenges.

Pleasant surprise - no major issues

IMPLEMENTATION OF GST

CRITICAL FACTORS FOR SUCCESSFUL IMPLEMENTATION

OF GST


On the day of GST introduction and throughout the

months, questions from businesses and public were expected

to be so much that everyone has to

attend to the queries

HELP DESK / CALL CENTRE

Effective communication and close cooperation with stakeholders

AWARENESS PROGRAMME

General public are basically given awareness through outreach program and also through electronic and print media. The awareness program also includes appointing GST advocates and ambassadors, public acceptance and persuasion program which is carried out to train NGOs both public and private.

TECHNICAL PANEL UNIT

EFFORTS TAKEN IN IMPLEMENTING GST



Target group

CONSUMER BUSINESS GOVERNMENT

4,227program

161,384participants

443program

62,148participants

210program

27,381participants

*Nota: 2010 - 2013

GST COMMUNICATION PROGRAM



GST Communication Program

3methods

Main stream newspaper

Traditional – brochure, TV advertisement, radio,

newspaper & magazines, talk show, billboard,

bus & taxi wrap, bunting etc.

Social Media – facebook, twitter, blogs & online media

gstmalaysiainfo.blogspot.com

https://twitter.com/gstmalaysiainfo

Telephone : 1 300 888 500 / 03 8882 2111

Website : www.gst.customs.gov.my



HAND HOLDING PROGRAMME



CURBING PROFITEERING ACTIVITY


INFORMED COMPLIANCE - ENGAGEMENT WITH STAKEHOLDERS




Legislation

→ GST Act 2014• Has been gazette on 19 June 2014

→ 3 Regulations have been gazette on 1 July 2014• General Regulations;

• Advance Ruling; and

• Tribunal Regulation.

→ 8 Orders • 5 orders have been gazette on 1 July 2014

Threshold;

Rate of Tax;

Gov. Taxable Supplies;

Designated Area; and

Tax Agent Fee.

LEGISLATION READINESS

• 3 orders have been gazette on 13 October 2014 Zero rate;

Exempt; and

Relief.




→ 1 General guide • completed and

uploaded in GST

website

→ 16 Specific guides • completed and

uploaded in GST

website

→ 55 Industry guides • completed and

uploaded in GST

website

→ FAQ provided are

based on the

following groups:• General

• Consumer

• Tourist

• Business

• Taxpayer Access

Point (TAP)

→ To assist those

groups in obtaining

the required

information on GST

→ 5 FAI published and

uploaded in GST

website

→ Some of the issues

are:• Last date to issue

invoice under the

Service Tax or Sales

Tax

• Goods received free

and given away free

• Price display

Process &

Procedure

Frequently Asked

Questions (FAQ)

Frequently Asked

Issues (FAI)




→ published by RMCD on 2 January

2015

→ The list was printed in the booklet

form and uploaded in GST website• 13 categories of taxable and non-

taxable goods (e.g: grocery, food &

beverages and household)

→ To assist consumers in identifying

the GST treatment on the 1,800

commonly purchased goods

→ published by KPDNKK on 1 February 2015

→ 2 million copies were distributed through out

Malaysia and uploaded in KPDNKK website

→ The price changes were published based on

prices from 6 different zones as follows:• Central (Selangor, WP and Negeri Sembilan)

• South (Malacca and Johor)

• North (Kedah, Perlis, Penang and Perak)

• East (Terengganu, Kelantan and Pahang)

• Sabah

• Sarawak

→ 500 types of selected goods

Sundry Goods Shoppers’ Guide

CRITICAL FACTORS FOR SUCCESSFUL IMPLEMENTATION

OF GST


ANTI-GST PROTEST23 March 2015

ANTI GST PROTEST

"Today is one week before GST takes off. We are going to stay put until we get satisfactory answers to all our queries," PSM secretary-general S. Arutchelvan

106 questions


FIRST DAY BLUES


APOLOGY LETTER

FIRST DAY BLUES


The day before GST & first day

Angry…

Pay before

12am no

GST 6%

Pay after

12am

subject GST

6%


First day and in the subsequent weeks

REGISTERED

RETAILERNON REGISTERED

RETAILER

Price with GST 6%

Price with no GST 6%

Confused…

GST 6%

WHAT?????.......I thought cooking oil

is zero rated!!!!But…….sunflower oil

is standard rated.

LEARNINGS


Forbids any increment in the net profit margin of goods and

services between 1st Jan 2015 and 30th June 2016

Many traders took advantage

intentionally increase the prices before Jan 2015

Law is only enforced for 18 months, 3 months before GST

and 15 months after GST

BACKFIRED????

PRICE CONTROL AND ANTI PROFITEERING ACT (AMENDMENT) 2014


Reasons for not claiming:

Incurring additional

cost/expenses

Cash flow - Refund is given in equal

instalments over a period of two years

Fear - application may not be

approved or do not want to take the risk

MEANT TO ELIMINATE EMBEDDED TAX BUT WAS THE OBJECTIVE ACHIEVED?????

PURPOSE:

RESULT:

SPECIAL REFUND

Only about 2,000 out of 70,000 businesses claim for Special Refund.

Others refused to claim resulting in price hike due to embedded tax.


An expeditious refund procedure to deal with excess net credits

Prevalence of fraudulent refund claims often makes tax administration

verify all refund claims before approving refund

REASON :

Businesses are bound to make mistakes in their first few returns and it delays the process as officers need to do verification.

False claim / fraudulent claim often happens when a new tax is introduced.

RESEARCH BY

KPMG

WORLD AVERAGE

RATE FOR

REFUND: 56 days

Refund within 14 working days is not

possible at the initial stage of

implementation.

However, the refund percentage improved from 18% to 70% within 9 months

REFUND – 14 WORKING DAYS???


Few, ideally no, exemptions

Zero-rating only for exports

Exemptions force tax rate higher, which makes VAT less efficient and causes more distortions

Exemption and zero-rating worsen C-efficiency

REPLACEMENT TAX WITH

MORE ZERO RATING &

EXEMPTIONINTRODUCE AT A HIGHER RATE

ZERO RATE & EXEMPT


FAIZULNUDIN BIN HASHIM

SENIOR ASSISTANT DIRECTOR OF CUSTOMS

[email protected]

+60388822845

ROYAL MALAYSIAN CUSTOMS DEPARTMENT

29

THANK YOU

experiences and learnings from introducing gst in malaysia

Documents