A Goods and Services Tax (GST) could be the remedy to address the decline in revenue expected from depleting oil resources in the country in the future, say tax experts.

The tax, according to a Bernama report, will serve as an alternative source of revenue for the government

However, tax experts said the implementation of the GST should be properly carried out by the government.

Inter-Pacific Research Sdn Bhd's head of research Anthony Dass said the current trend in the government driving the economy might shift to the private sector being the main engine of growth by 2008.

Dass said the GST should ideally be implemented the latest by 2009.

If the private sector really moves up as the main engine of growth, then, there is a strong case for GST to come in, he said.

Dass said this at the Bernama Roundtable on the 2008 Budget. It was chaired by Bernama editor-in-chief Yong Soo Heong, deputy editor-in-chief for Bernama economic service Salbiah Said and economic service editor Mikhail Raj Abdullah.

Dependent on oil revenue

Malaysian Institute of Taxation president Dr Veerinderjeet Singh said quite a sizeable amount of the government's revenue came from petroleum and petroleum-related sources.

It was unfortunate that total revenue from petroleum would decline in the next four years as the country was very much dependent on oil revenue. By then Malaysia will be a net importer of oil.

Going forward, the issues that arise were Malaysia's petroleum reserves drying up in a few years' time and "how do we then switch from this source of revenue to alternative sources," he said.

"These are the concerns that obviously need to be addressed," he said.

"The GST, supposed to have been implemented early this year, could be the answer to it," said Veerinderjeet, who is also managing director of Taxand Malaysia Sdn Bhd.

He cited Singapore whereby the successful implementation of GST led to quite a substantial revenue generation for the economy.

Tax Advisory and Management Services Sdn Bhd's executive director Yong Poh Chye lauded the proposed GST, saying the ideal level to start the new system should be at three percent.

In 2005, the government had announced the implementation of the GST in January 2007 to replace the current sales tax and service tax structure.

However, in February 2006, the Finance Ministry announced the government's decision to defer the implementation of the GST to a later date.

Another round of inflation

The GST, when implemented, is expected to bring another round of inflation following the series of oil price hike over the past two years.

At present, the government is levying sales tax on goods at the point of import or at the manufacturers' level and a service tax on selected services, including those provided by professionals and operators of hotels and restaurants.

The introduction of the GST is part of a review of the taxation system proposed by Prime Minister Abdullah Ahmad Badawi, who is also finance minister, in his first budget in 2004.

He said the GST tax, which is based on a value-added concept, would be more 'comprehensive, efficient, transparent and effective', thereby enhancing tax compliance.

"The introduction of this new tax will also provide the government with the opportunity to reduce corporate and individual income tax rates," he added in his 2004 budget speech.

However critics argued that the tax burden currently borne by the corporate sector would be shifted to ordinary people under the GST scheme.