00:00Hi, welcome back to Consider This, I'm Melissa Idris. Let's continue our discussion about the
00:16expansion of the SST as taxes of between 5 to 10% will be imposed on discretionary and non-essential
00:24goods and services starting from July 1st. Joining me on the show right now is Dr. Ahmad
00:30Razman Abdul Latif who is the Director of Coursework Programs at Putra Business School. Dr. Razman,
00:35thank you for being on the show with me today. I'm hoping we can start a conversation by looking
00:39at some of the new sectors that have come under the SST expansion. So construction and financial
00:47services, I think private healthcare, private education, I think beauty services also now are
00:51going to be coming under SST. From an economic perspective, do you agree with that list? And
00:57are these the right sectors to target if the goal of broadening the tax base without burdening
01:06the lower income group is to be achieved? Well, we have to look way back when Dr. Sri Anwar
01:17was the first time becoming the finance minister during the 90s when his goal or his so-called accomplishment
01:29is to come up with surplus fiscal policy. And this is something I think become his personal
01:43crusade, how to finally reverse the deficit fiscal that we have been expressing since 1998. And at the same time, if we look at the current unity government, the word unity itself means that it is not dominated by one party, meaning that you cannot do something drastic that will create the anger of major population. So the best
02:13way or the best way or the best option that he has is not to disrupt the whole taxation system basically coming out with or reverting back to GST, but more or less improvising on the existing one. But the focus will be targeting the non-essential product or services, which might not be acceptable to some quarter of the population. But what he
02:42trying to emphasize again and again in his speeches is that these are the essential, these are the products that are not really consumed by the majority of the population. However, it's still debatable. People highlighted, pointed out that some of these products are no longer considered premium. It is a part of the common consumption or the
03:12majority of the majority of the population. But of course, when we look into what he has reiterated and also committed that this is not absolute, meaning there's room for continuous improvement, meaning some item might be excluded from such increase. And it's not necessarily a blanket imposition of higher taxation across the category of sector.
03:40So we probably will see further enhancement or improvement on the scope of the test increase.
03:47All right. Well, so I want to explore that a little more with you, because let's take the category of food, some of the foods that have been characterized as non-essential or discretionary spending.
04:03Malaysia relies quite heavily on imported food. More often than not, it's because we can't produce certain items locally in sufficient quantities or quality.
04:13So in that context, there have been people who say that do not tax food and taxing certain types of food sends the wrong message.
04:22Like only the wealthy should be able to eat items like salmon or avocados.
04:27How do you see this? Is this a valid concern? How should policymakers be thinking about fairness in food taxation, particularly in a Malaysian context where it's really hard to make that distinction between discretionary and essential?
04:43Yes, it is.
04:44Yes, it is a tricky thing to do, especially when majority of the population actually living in urban city, including the B40 and also M40.
05:01So meaning that do we have or do they have a choice when certain food items were considered premium when in fact they do not have other option or other food to consume.
05:17For example, when we are talking about fruits, we are well aware that apple, oranges, these are the imported fruits.
05:26But what choice or what option do we have when presented with such a scenario?
05:32We cannot consume one type of local fruit all the time.
05:39So because of that, I think even the Deputy Prime Minister said recently that there will be a review on the type of food that even though primarily imported from outside,
05:55but it is considered as an essential or necessary for the population, that kind of food will get the exemption.
06:06But of course, feedback from the public is very important from the consumer.
06:10And what the government really want is to come up with this implementation of the higher rate for SST for certain products.
06:22But the improvement will come later upon the feedback by the public.
06:27Okay. Well, I'm just wondering how the public, whether or not the public is ready for a broader tax base.
06:34We know that's the stated goal of this government to address the tax gap.
06:39So in broadening the tax base, how do you see that the timing of it, especially amid other cost of living pressures?
06:48We've got the electricity tariffs coming in, then the reduction or rationalisation of subsidies eventually this year.
06:57How important is the sequencing of these reforms and the communication of such to the public?
07:04Well, interestingly, the latest statistic on inflation rate shows that we experienced an inflation of 1.2%, which is very low indeed for the past many years.
07:19And so this actually allowed the government to implement such policy or such measure due to the fact that even it's going to cause the price of the products to increase.
07:36But it is still within the expected or tolerable limit, I would say.
07:41Even Bandegara Malaysia somehow predicted that the inflation rate is not going to exceed 3% this year.
07:49And even with the upcoming rationalisation of round 95, the revision rate of tariff, electricity tariff rate, as well as the uncertainty in the global economy.
08:06So it seems that the government believes there is still room for the inflation rate to hide a little bit further coming from this increase of rate of necessity.
08:25But it's not going to be too high.
08:30And one thing that's going to be certain, all the additional revenue and savings from the petrol registration after this will definitely be channeled back to the affected group.
08:49So there must be immediate implication, positive impact coming from such move so that the people can see that the government is really taking care of their need or concern.
09:05I agree with you. I think public trust is key in any tax reform.
09:11But in your view, what what can the government do to build buy in for this?
09:18I mean, we've we've heard that the backlash coming in from all quarters of society, particularly the middle class who feel like they're the ones getting squeezed and also the SME sector who think that they might not be able to manage with this sudden expansion of the SST.
09:36Well, if you look at the latest poll by medical center, the people approval on PMS or government even has increased, meaning that what the government is doing is to make sure there is a transparency.
09:57There is there is a continuation of what they have done, meaning that if they have implemented all this initiative or policy, there must be output or impact coming from from such execution of this policy or initiative.
10:20So what we have seen that when the government introduced the progressive wage policy as well as doing the rationalization of diesel and then immediately SARA and as well as STR allocation has increased.
10:43So this is what important for the people to see that the money being collected or the money being saved has gone to the rakyat.
10:56But I do agree.
10:57At the moment, the focus mainly on B40s and the M40s groups somehow still feel being stipulated and being neglected.
11:07So I assume with all this calibration of the SST rate, government probably will be planning something more beyond than just helping the B40s, but perhaps some monetary or fiscal incentive for M40.
11:26I think that one probably will come when the focus on the recession of petrol coming to effect and the money being transferred to E-wallet or MyCard.
11:40I think that could probably have some impact on elevating the hardship faced by M40 as well.
11:49Okay, well, look forward to seeing what kind of developments or what also might be announced in budget 2026.
11:56We'll see.
11:57Dr. Razman, thank you so much for being on the show with me today.
11:59I appreciate your time.
12:00Dr. Ahmad Razman Abdul Latif from Putra Business School there wrapping up this episode of Consider This.
12:06I'm Melissa Idris signing off for the evening.
12:08Thank you so much for watching.
12:09Good night.
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