(Bloomberg) -- Malaysian policymakers should consider re-introducing the goods and services tax at an appropriate time, Economy Minister Mustapa Mohamed said on Thursday.
“While the government will always put the people first, when this crisis settles down and things normalize, we must begin to gradually set our economy back on a sustainable fiscal footing,” said Mustapa in a speech at briefing by the OECD.
He was commenting on a recommendation by the OECD that Malaysia bring back the consumption-based tax in the medium term to boost its falling revenue.
The GST was repealed in 2018 as part of policy changes that the previous government introduced after winning a historic election. The OECD in its economic survey published Thursday said that the tax, first imposed in 2015, had helped shore up the federal government revenue “tremendously.”
Malaysia's fiscal situation has been strained since last year year due to economic contraction, a “steep” decline in revenue, and increased spending on healthcare and income support, said Mustapa. And the virus outbreak isn't showing signs of abating -- a record 21,668 new cases were added on Thursday.
Malaysia's central bank is set to lower its 6%-7.5% growth forecast for the year when it reveals the second-quarter data Friday. The OECD projects the economy to grow 4.3% in 2021, and 6.1% in 2022. Even so, the estimates are “big improvements” from last year's 5.6% contraction, Mustapa said.
“Malaysia will deliberate on some of the OECD's recommendations, and where suitable, will incorporate them into our medium term and long term economic policies,” he said.
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