Tax News: Older population may mean higher tax rates
Famous saying: Two things are certain; death and taxes
Malaysians are living longer today versus 20 years ago. That is a good sign that we are enjoying a good life and have access to good medical care too. I do think that the life expectancy of Malaysians would continue to rise too. Take a look at the below for Malaysian’s life expectancy versus some selected countries.
Living longer is a positive news. There’s also something negative to a country with ageing population though. You see, when people reach retirement age, they stop working and stop receiving monthly salary. In other words, they would have to spend their savings and rely on government’s assistance. At the same time however, the government is receiving lower tax payments because the working population is getting smaller versus the retired population. This is happening faster in many developed countries. One of them is our neighbour down south. They are always thinking ahead and has taken the following step on tax.
Article in malaymail.com The goods and services tax, which is levied on everything from groceries to diamond rings, will be increased by one percentage point to 9 per cent on 1st January 2024. This is the second phase of a two-stage rate hike. This year the sales tax was raised to 8 per cent from the previous 7 per cent, which has been unchanged for 15 years.
The government has said the tax increment was necessary to bolster state finances as it prepares for a surge in Singapore’s ageing population and rising healthcare costs. It is estimated that a quarter of the population will be 65 and older by 2030.
The government has handed out fiscal relief to households in an “assurance package” worth more than S$10 billion (US$7.55 billion), including S$200 to S$800 paid out to all adult Singaporeans this month. Please refer to the article for the details: Article in malaymail.com
What about Malaysia then? Since we do NOT have goods and services tax?
Malaysia’s service tax rate will be increased to 8.0 per cent instead of 6.0 per cent but this does not include services such as food and beverages, and telecommunications. I am however unable to find the actual starting date to this new tax rate. It was reported to start in 2024 and 2024 is a few days away from today (28th December 2023).
As for the impact from a higher service tax, here’s an article: www.malaymail.com: Malaysia’s new 8pc service tax rate increases govt coffers without GST comeback, but may up consumers’ costs, tax firms say
GST should make a comeback
Without GST which is considered the most efficient tax system (just google and you will know why I say so. Anyway, it’s the MOST widely uses tax system in the world including all the amazing countries whom Malaysians envy yeah). If you like to read about goods and services tax, this is a super easy article: Inland Revenue Authority of SIngapore. Below is a simple statement from them.
“GST was introduced in 1 Apr 1994 to enable Singapore to shift its reliance from direct taxes to indirect taxes. GST has also enabled Singapore to sustain a lower income tax rate. Being a tax on consumption, and not income, GST inherently encourages savings and investments.”
All the best to all of us because whether it’s SST or GST, when the country goes into ageing mode, then the tax rates will continue to rise. Malaysia is today an ageing nation and is predicted to become an aged nation by 2035. (just 11 years away…) Read here for details.
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