MARKET DEVELOPMENT
WTO Tracks Malaysian Tax Developments
WTO Tracks Malaysian Tax Developments
10/03/2014 (Tax-News.com) - Malaysia needs to implement fiscal consolidation and tax reforms to ensure equitable and sustainable growth, the World Trade Organization (WTO) said in its Trade Policy Review of Malaysia.
The WTO noted the country's plans for fiscal consolidation, tax reform and expenditure rationalization. It noted in particular the long-awaited introduction of a goods and services tax (GST) with a six percent headline rate, which is to be implemented by April 2015.
The WTO's Trade Policy Review reports track movement in countries' tax and trade policy regimes. The WTO commented on the impact that export taxes, worth 1.5 percent of total tax revenue in 2012, are having on the domestic prices of affected commodities, such as timber and crude palm oil. Malaysia taxes relatively few exports, but the taxation of those goods has discouraged exports, and kept domestic prices for key inputs low, thereby boosting domestic economic output, the report says.
Tax concessions, along with grants and low-interest loans, continue to support the production and trade of various agricultural and manufactured products, and are supporting small and medium enterprises (SMEs), research and development, and environmental-protection activities, the report adds.
The WTO's report highlights the country's use of export taxes on principal commodities, coupled with corporate tax exemptions for exporters. It also charts the multitude of tax incentives that Malaysia provides to support manufacturing activities.
Despite the need to boost the tax base, the Malaysian Government has considered the impact of new taxes on businesses. In announcing a GST to broaden the tax base, Malaysian authorities said that the tax regime would remove the double taxation faced by businesses, and improve the competitiveness of Malaysian exports. The regime will also remove distortions to supply chain decisions caused by the current gross-based consumption taxation system.
The WTO noted the country's plans for fiscal consolidation, tax reform and expenditure rationalization. It noted in particular the long-awaited introduction of a goods and services tax (GST) with a six percent headline rate, which is to be implemented by April 2015.
The WTO's Trade Policy Review reports track movement in countries' tax and trade policy regimes. The WTO commented on the impact that export taxes, worth 1.5 percent of total tax revenue in 2012, are having on the domestic prices of affected commodities, such as timber and crude palm oil. Malaysia taxes relatively few exports, but the taxation of those goods has discouraged exports, and kept domestic prices for key inputs low, thereby boosting domestic economic output, the report says.
Tax concessions, along with grants and low-interest loans, continue to support the production and trade of various agricultural and manufactured products, and are supporting small and medium enterprises (SMEs), research and development, and environmental-protection activities, the report adds.
The WTO's report highlights the country's use of export taxes on principal commodities, coupled with corporate tax exemptions for exporters. It also charts the multitude of tax incentives that Malaysia provides to support manufacturing activities.
Despite the need to boost the tax base, the Malaysian Government has considered the impact of new taxes on businesses. In announcing a GST to broaden the tax base, Malaysian authorities said that the tax regime would remove the double taxation faced by businesses, and improve the competitiveness of Malaysian exports. The regime will also remove distortions to supply chain decisions caused by the current gross-based consumption taxation system.