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Saturday, October 19, 2013

Malaysian Budget 2014 - GST Implementation and consequences

PFA Asia Malaysia Financial Planner on Malaysia GST Implementation

 Next Friday, 25th October 2013 is Malaysian Budget Day.

One of Malaysians main concern is the implementation of the goods and services tax (GST).


                                PFA Asia Malaysia Financial Planner on Malaysia GST Implementation

Fitch Ratings, one of the Top three global ratings agencies, recently downgraded the country’s sovereign outlook rating from A to A- as Malaysia’s current fiscal deficit remain unresolved. They also states that the country’s main weakness is still in public finances sector, namely the high federal government debt that stood at 53.3% of GDP at end of 2012 compared to 51.6% at end 2011. At the same time, the country’s low fiscal revenue base stands at 24.7% of GDP compared with the median of other A rated countries (example: Taiwan, South Korea, China) at 32.8%.


One of the steps which the government will take to improve the country’s fiscal position is the implementation of GST. Currently, there’s a very narrow tax base as less and less registered companies and labor force pay taxes. Thus, GST will be a solution to broaden the tax base and increase revenue. The proposed GST will replace existing sales tax (10%) and services tax (6%) (SST) instead of adding on it. It is estimated that a 5% GST rate would result in a net increase in tax revenue for the Government by up to RM8 billion for the first two years.


                                   PFA Asia Malaysia Financial Planner on Malaysia GST Implementation
In the worst case scenario, the cost of living will rise. Middle-income earners will be worse hit, especially those who earn RM4,999 or less, which is not enough to make ends meet when inflation in consumer goods strikes. The cost of borrowing will also increase due to this, resulting in higher cost of doing business which will lower country's competitiveness.


In the end, questions that everybody should ponder upon daily should be:

  1. How should I start to monitor my expenditure?
  2. Do I have a better cost saving alternative before I made a purchase?
  3. How do I balance my current lifestyle expenditure with the inevitable rising cost of living?
Be wise, plan ahead for your personal finances or business finances wisely. As the saying goes; if you fail to plan, you are planning to fail. Have a T.E.A (Think, Evaluate and Act)



1 comment:

  1. Totally buy this, one should be wise while planning as one wrong move and everything will be finish. Thanks for sharing the blog..

    ReplyDelete

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