The government should prioritise raising Malaysians’ incomes before considering the reintroduction of the Goods and Services Tax (GST), despite the tax system being seen as more effective in generating revenue, said economic content creator Faiz Ahmad.
Faiz said GST had advantages over the Sales and Service Tax (SST) in terms of collection efficiency, but any move to reintroduce it must take into account the public’s ability to bear a higher tax burden.
“If we implement it now, our revenue could certainly increase, but the government may still be cautious because people’s incomes generally need to rise first.
“We should not view either system as 100% perfect because both have their own strengths and weaknesses,” he said.
Faiz was speaking as a panellist at Wacana Sinar Edition 490, titled “Budget 2027: Election Sweetener Or Remedy For The Malaysia Plan?”, hosted by Ismail Adnan at Studio F Karangkraf on Wednesday.
He said GST and SST operated through different mechanisms, with the existing system allowing the government to determine which groups should be taxed and which should be protected.
At the same time, the country’s taxation system should move in tandem with efforts to strengthen household incomes, including through the implementation of a progressive wage policy.
Faiz said the government could leverage government-linked companies (GLCs) and government-linked investment companies (GLICs) to create stronger market pressure on wage structures.
“Funding for the progressive wage policy is still very limited, so we need to think about how to make the policy more effective for workers,” he said.
He also said any target to raise the minimum wage should take employers’ ability to cope with higher labour costs into consideration, particularly micro, small and medium enterprises (MSMEs).
Faiz suggested that the government could support less financially capable employers through conditional programmes involving training and productivity improvements before providing incentives to support higher wages.
“If we force all employers to raise wages at the same rate, some companies may not be able to survive, particularly MSMEs.
“Assistance can be provided based on certain conditions so employers can improve their capabilities first before receiving financial support,” he said.
Faiz added that economic growth should translate into improved living standards rather than being reflected solely in an increase in the country’s gross domestic product (GDP).
He said GDP growth should be accompanied by higher incomes among lower-income groups so that the benefits of economic development could be felt more broadly.
“If our GDP rises but incomes at the lower end do not move in tandem, we cannot yet say that the growth is truly being felt by everyone,” he said.
