Corporate and income tax will be gradually reduced, once the proposed Goods and Services Tax (GST) is in place by mid-2011, said Deputy Finance Minister Chor Chee Heung.

"This is long term objective of the government. Once the GST come into play, it will be a broadbased tax.

"The trend is, once the GST is implemented, corporate and income tax will gradually be reduced," he told reporters after officiating the PTD Alumni Policy Dialogue on the GST in Kuala Lumpur today.

Asked if there would be a timeline for this, he said: "I don't think we have a timeline for it."

Chor also disclosed that businesses related to government services such as food and transport, are exempted from the GST.

The deputy minister also gave an assurance that the cost of living and lifestyle of the people would not increase or be affected, despite the GST implentation.

He stated that the implementation would not cause inflation either.

"Once the GST is in,the service tax and sales tax would be abolished.

"Both taxes are quite high at 10 per cent and five per cent respectively.

"The GST at four per cent is considered very low," he explained.

Meanwhile, the Finance Ministry's tax review panel chairman Kamariah Hussain said there would be revenue gains of about RM1.0 billion, with the GST implementation.

She explained that the introduction of the GST is part of an overall tax reform in the country.

"With the GST, the government would have a better mix of revenue, and not be too dependent on income tax and petroleum income," she added.

Second Finance Minister Ahmad Husni Hanadzlah has indicated that while the GST would replace the existing sales and services taxes, it would not put pressure on prices and to ease the burden of consumers, staple foods such as rice, sugar, cooking oil and flour would be exempted from it.

The GST bill was tabled for its first reading in Parliament last December.

The second reading is during the Parliament session this month.

- Bernama