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In the early 1990’s there was an equal contribution to revenue between direct and indirect tax for example in 1990 the contribution from direct tax is 35.2% and indirect tax is 36.7%. However, with trade liberalisation policies in the 1990’s this proportion has changed substantially and in 2012 contribution from direct tax was 56.4% and indirect tax 17.2%. Studies by economic experts have shown that over reliance on a particular tax will have an adverse effect on the nation’s financial position. Currently, Malaysia relies heavily on direct tax and petroleum revenue and now it is an appropriate time for the Government to undertake an overall tax reform to correct the imbalances. One of the measures is to introduce GST which is a more efficient system compared to the current tax system.
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