The Malaysian Prime Minister has defended the introduction of a goods and services tax (GST) in Malaysia with effect from April 2015. The Government has stated that it will bring 300,000 taxpayers out of the income tax base with revenues which will be generated from the GST. The income tax rates will fall by 1% to 3% and households with a monthly income of up to MYR4,000 will be exempt from income tax.
Malaysian tax policy is therefore following the pattern in many other countries where indirect taxation in the form of a value added tax (VAT) or a GST is growing in importance while direct tax rates are being reduced to maintain competitiveness and relieve the tax burden on lower income groups.
The top rate income tax threshold will rise from MYR100,000 to MYR400,000 and there will be a lower tax rate of between 25% and 26% for those earning income above the threshold. Corporate income tax rates will fall from 26% to 25% percent. The tax rate on small- and medium-sized enterprises will also fall by 1% to 19%.
The introduction of a 6% rate of GST from April 2015 will give Malaysia the lowest GST rate among the Association of Southeast Asian Nations (ASEAN) member countries. The GST will replace by the sales and services taxes.
