No abstract

Objective - Since the 70s, the Malaysian government has been focusing on sustainable development to improve society's economic well-being. In September 2015, Malaysia reaffirmed this commitment with the other United Nations countries by putting the 2030 Agenda for 17 Sustainable Development Goals (SDGs) into action and focusing on the bottom 40% households (B40). Unfortunately, the implementation of Goods and Services Tax (GST) on 1 April 2015 and followed by the Sales and Services Tax (SST) 2.0 on 1 September 2018 has impacted all income groups, especially the B40, with a claim that indirect tax is regressive and burdensome (MIER, 2018). Hence, the present study aims to analyse SST 2.0 tax burden using the elements of the guiding principles of good tax policy. Methodology/Technique - In this quantitative study, the researchers distributed questionnaires to the B40, M40, and T20 groups throughout Malaysia. Evidently, the government should consider reducing the SST 2.0 tax rate to minimise the tax burden of all groups of income earners based on the ability to pay. Findings - Furthermore, the efficiency of tax administrations is vital to strengthen the enforcement function in controlling the prices of goods and services. The findings can provide useful feedback to policymakers and tax authorities in designing a progressive indirect tax. Novelty - The policymakers should also consider the new SST model and propose relevant social safety net programmes to enhance economic well-being and eradicate inequity. Type of Paper - Empirical. Keywords: SST 2.0; GST; Tax Burden; B40; Guiding Principles of Good Tax Policy. JEL Classification: H31.

In view of the strong rumor that the Goods and Services Tax (GST) may be re-introduced in Malaysia, Bernama (2022) reported that Malaysia is keen on reintroducing GST to expand its revenue base and carry the weight of public subsidies. In fact, no country in the world has reverted from the Goods and Services Tax (GST) to the Sales and Services Tax (SST), except for Malaysia. Due to GST abolishment, Malaysia incurred an annual revenue loss of RM20 billion, and, surprisingly, the reintroduction of SST 2.0 did not contribute much to the government. Compared to the GST collection of RM41 billion in 2016 and RM44 billion in 2017, SST 2.0 only collected RM26.7 billion in 2020 and RM27.9 billion in 2021. Unfortunately, from the public's perspective, GST remains a very unpopular indirect tax reform due to its regressive nature, affecting both the poor and poor the rich. Since the tax applies to every transaction regardless of the socioeconomic status of individuals, it places an undue burden, especially on poor households. Similarly, the SST 2.0 also disappoints the public since it has the same features as SST 1.0, for instance, high tax evasion levels by businesses (Sanusi et al., 2015) and a cascading impact of sales tax whereby the tax incurred by manufacturers is re-taxed (tax-on-tax effect) to a certain extent at subsequent manufacturing process stages, thus increasing the prices of goods and services (Zhou et al., 2013). Besides, literature on the key catalyst of the public acceptance of Malaysian indirect tax also lacks discussions on a specific public acceptance model for indirect tax policy implementation. Since these unresolved problems could instigate another tragic rejection by the public and impact the government's revenue collection, this study, therefore, aims to bridge the gap by proposing an indirect tax acceptance model using the guiding principles of good tax policy recommended by AICPA (2017). Keywords: Goods and Services Tax (GST), Indirect Tax Policy, Good Tax Policy.

Since the Goods and Services Tax (GST) was highly politicized as a tax that oppresses lower-income groups, its abolishment became the new government's (Pakatan Harapan) promise in the election manifesto and, as a result, Malaysia is the only country that reverts from the Goods and Services Tax (GST) to the Sales and Services Tax (SST) (Wong & Kee, 2018). On the contrary, the Barisan Nasional camp defended the position of GST, claiming that Pakatan Harapan's SST is the actual burden to the citizens, as asserted by former prime minister Datuk Seri Najib Razak (The Edge Malaysia Weekly, 2019). Notwithstanding these assertions, it is evident that both SST and GST are claimed to be regressive since they may impose a heavier burden on lower-income groups than higher-income groups (Narayanan, 2014), thus affecting the household consumption expenditures of these groups (Jamel et al., 2021). While managing the public acceptance of tax changes is rather complex, especially if the changes are deemed unfavorable with the possibility of undermining spending patterns following their implications on product rates, the public is also likely to resent the government's tax increment due to the burden imposed on them. Keywords: Indirect tax policy, tax burden, spending patterns, household consumption expenditures

In Malaysia, the indirect tax environment is evolving fast, and the risk has never been higher. The public perception of Sales and Service Tax (SST) as a business cost aggravates the increase in essential needs prices. Hence, the heavy burden on Malaysians’ income, which ultimately constitutes a big worry and outcry, makes the study relevant. The study investigates the relationship between selected causes of equity and fairness (tax fairness), certainty (tax burden), accountability to taxpayers, tax knowledge, and public acceptance of SST implementation in Malaysia. Data were collected through a structured survey among the public in Klang Valley. Respondents were chosen randomly from various locations in public and private sector organizations. A total of 177 out of the 228 completed and received questionnaires are found suitable for further analysis. The study adopts the SmartPLS version 3.3.2 statistical analysis tool to test the four hypotheses formulated. The study results reveal tax fairness, tax burden, and government accountability are significant and positively relate to public acceptance of SST implementation in Malaysia. This further buttressed that tax fairness, tax burden, and government accountability are critical for public acceptance of SST implementation because of their economic implications. In contrast, tax knowledge is not significant and negatively relates to public acceptance of SST implementation. The effect indicates that tax knowledge is not an essential factor as far as public acceptance of SST implementation is concerned in Malaysia.

From 1st September 2018, the reimplementation of the Sales and Service Tax (SST) was due to take effect replacing the Goods and Service Tax (GST). The nation opposed GST as they argued that it was an added burden to their already high living cost. As the government had to find an alternative source to collect tax revenue, the best solution will be implementing the Sales and Services Tax. In contrast to GST which was carried on a value-added concept, this new charge is only imposed at manufacturer stages. Therefore, the supply chain would result in higher charges, shifting from manufacturers to retailers and consumers. Although the Consumer Price Index (CPI) basket is taxable, it is just 38 per cent of the total products and services. According to the National Worry Index conducted by Emir Research Malaysia, most respondents believe that Sales and Services Tax failed to reduce the prices of goods and services. Hence, acceptance is vital to ensure the success of indirect tax. Therefore, the present study aims to examine tax authorities’ role and public acceptance of SST in Malaysia. Data from 180 people living in Klang Valley were collected through a survey. To examine calculation and structural models, the Partial Least Square - Structural Equation Model (PLS-SEM) approach was adopted. This study’s findings suggested that tax authorities’ effectiveness, namely, the Royal Malaysian Customs Department (RMCD) and the Ministry of Domestic Trade and Consumers Affairs (KPDNHEP), influenced public acceptance. Furthermore, the adoption of SST requires tax transparency and public confidence in the government. The understanding of the government, in particular, is a critical problem because, as an acknowledgement of the SST, it goes beyond the direct range of the taxation authorities. The public should perceive that tax authorities are effective, transparent, and trustworthy in executing indirect tax. Malaysians would be more accepting if the government declares the revenues from the tax obtained, as well as spending the tax income wisely on public amenities. These findings have important implications for the government to understand public acceptance in SST. Transparency will enhance public confidence in the government. Malaysians have to perceive that the Malaysian tax authorities are useful and the tax must be transparent to give their full trust to the government.