GST to have minor inflation effect

KUALA LUMPUR: THE Goods and Services Tax (GST) to be introduced next year will have some inflationary effect but it would be temporary, Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said.

He said the inflationary effect will subside as the economy adjusts to a “new equilibrium”.

Husni said the Consumer Price Index — the official barometer of inflation, is expected to see an additional 1.48 percentage points to its reading after the GST comes into effect in April next year.

The GST is part of the government’s efforts to broaden its
revenue base.

It has already reduced income tax from 30 per cent to 26 per cent while corporate tax has been reduced to 26 per cent and 20 (for small and medium enterprises).

The mechanism was derived after a study of the 116 countries which have implemented it, particularly economies with per capita of below US$1,000 (RM3,220).

The government is finalising the list of goods and services which should provide some relief to the lower-income groups.

Speaking at the launch of the 18th Malaysian Banking Summit yesterday, Husni said a spike in oil prices following the Iraq crisis would not impact the timing of the GST or the ongoing subsidy rationalisation programme.

“The fuel subsidy programme we are studying will be good for the rakyat as the savings would be channeled to the target group,” he said, adding that the programme would be first tabled in the cabinet.

On 2015 Budget which will be tabled in Parliament on October 10, Husni said the government’s target to trim the budget deficit was on track.

Last year, it achieved 3.9 per cent to the gross domestic product, below its four per cent target.

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