Malaysia repeals consumption tax, reinstates old tax regime

[KUALA LUMPUR] Malaysia repealed a much-maligned consumption tax on Wednesday, as Southeast Asia's third-largest economy struggles with a burgeoning debt that its new government has blamed on the previous administration.

Prime Minister Mahathir Mohamad's coalition campaigned for the removal of the goods and services tax (GST) ahead of a May general election, when voters angered by rising living costs and rampant corruption booted out former premier Najib Razak and his long-ruling coalition.

Finance Minister Lim Guan Eng said the previous government had misused the funds raised through GST, which came into effect in April 2015, to finance crony projects and cover up the multi-billion dollar scandal at state fund 1Malaysia Development Berhad (1MDB).

"GST money was used to cover the hole in 1MDB's chest. GST was borne of 1MDB. Without 1MDB, there would be no GST," Mr Lim said when tabling the bill to repeal the tax in parliament.

"The people know that GST was introduced not to protect the interests of the people but that of Barisan Nasional cronies," Mr Lim said, referring to the previous ruling coalition.

Najib's administration set GST at 6 per cent, which was lower than the 16 per cent rate under the previous sales and services tax (SST) regime but covered a much broader range of items and services.

The repeal of the consumption tax follows parliament's move to reinstate the SST, which the government plans to bring in on Sept 1. However, the government has yet to announce the rate for the revived SST.

REUTERS