As SST rises, PM Anwar says Malaysia tax base remains low at just 11.2pc of GDP

Malay Mail
Malay Mail

SEPANG, March 1 ― Prime Minister Datuk Seri Anwar Ibrahim today said Malaysia’s tax base continued to be low, being the equivalent of 11.2 of the country’s gross domestic product (GDP) compared to Singapore’s 12.6 per cent and Thailand at 16.4 per cent.

Anwar, who is also the finance minister, said only 435,000 out of 1.5 million registered companies in Malaysia were actively paying taxes or less than a third of the total.

A country’s tax base is the combined worth of all assets, income, and businesses are liable for taxation.

“It is essential to ensure satisfactory results and effective management to prevent wastage and corruption, maintaining a consistently low tax foundation. The 11 per cent tax rate is much lower than Thailand’s 16.4 per cent and Singapore’s 12.6 per cent.

“This poses a challenging task, especially with relatively low taxes for companies in the country which is only about 29 per cent of registered companies, approximately 435,000 out of 1.5 million, pay taxes,” he said during his speech at the celebration of the 28th Inland Revenue Board (LHDN) Day here today.

He went on to say that there is an urgent need for resolve in performing the LHDN’s tax collection functions, saying that any amount received was crucial towards funding the country’s growth and development.

Still, he commended the LHDN for achieving its highest ever tax collection last year of RM183.34 billion or an improvement of 4.49 per cent on the previous record.

“The number of individual taxpayers, totalling 5.7 million, has not yet reached the level of a developing country.

“However, today, I cannot overlook the fact that successful steps have been taken through efforts and new initiatives by LHDN which have successfully increased revenue for the country,” he added.

Anwar also said the country must continue to reject corruption, adding that it was crucial for the LHDN to scrutinise those with unexplained wealth, regardless of their positions and political affiliations.

Anwar’s remarks today coincide with the implementation of an increased service tax, which he raised from 6 to 8 per cent under Budget 2024.

Aside from the increase, the tax has also been expanded to cover more categories in a move the Finance Ministry said was aimed at streamlining taxation in the country.

However, the increase will not affect services related to food and beverage, telecommunications, and vehicle parking services.