The Adoption of GST in Malaysia: Lessons Not Learned and a Few New Paths

Abstract

As one of the last countries in the region to adopt a goods and services tax (GST), or value‑added tax (VAT) as the tax is commonly labelled outside Anglo jurisdictions, Malaysia had no shortage of international and regional experiences to draw on when designing and implementing the new tax. While there have been some small hiccups in the adoption of the tax, the switch from a former sales tax (and service tax) to the GST has been a success from both fiscal and public acceptance perspectives. There is, however, room to view critically Malaysia’s disregard of some aspects of good tax design, such as its enthusiastic adoption of GST concessions, seemingly ignoring lessons from abroad on their complexity, cost and targeting inefficiencies. Some aspects of the cross‑border supply rules, implementation arrangements and administration procedures may also be problematic. Other design features, however, such as the unique regime for small agricultural concerns and the rules for financial intermediary services may provide examples for other jurisdictions.