1. Implications of Malaysian Tax on National Development, National Debts, and Social
welfare
The common definition for taxes is that, it's recognized as obligatory fee gathered by the
government authorities from persons or business institutions whether nationally and / or regionally
in order to finance its sectors (Fatt, 2012). However, Malaysian tax affects the government,
residences, and the foreign business in the country. Thus, the aim of this assignment is to discuss
the implications of Malaysian tax on the national development, national debts, and the social
welfare.
Malaysia is one of the countries that depending mainly on tax revenue, imposing tax
basically to create an indicator, collaborative and united Malaysian market in order to create
stronger as well as powerful economy which would eventually reflect the country’s development.
(Fatt, 2012).
National development indicates to the country’s capability in order to progress its citizens
life. Measurement of development could be material, like growing in the GDP, or social, such as
availability of healthcare and the literacy rates in the country, also providing the usable water,
maintain the educational institutions, providing the healthcare associations, providing the salaries
and wages to the workers etc. The government can only provide those activities by generating
enough revenue from the tax. Therefore, taxes in Malaysia are one of the major sources of
government revenue to provide those targets (Fatt,2012).
Tax could help the country in the long run. as government has lots of challenges and goals
which would achieve such as Vision 2020. Further GDP can be positively affected by the tax when
Malaysian government encourage investors to invest in the country by providing lower tax to the
multinational companies (MNCs) as the government seeks to attract the local as well as the FDI
foreign direct investment in order to bring in more industries and assemble companies such as
Toyota, Toshiba, and Airbus group that can provide more jobs, increase exports, reduce un-
employment. In this case, tax revenue will be positively affected, by gaining the annual tax from
these companies, and the income tax from the workers working at these companies.
2. The table below shows the rank of the international students in the countries around the
world as Malaysia the 12th country which means that the country attracts the foreigners to study
in the country because of the country’s national developments. (Unescoo, 2014)
And according to the Second Education Minister Datuk Seri Idris Jusoh (2012) who said
that, the country is on track to achieve the target of attracting 200,000 international students by
2020 in line with Malaysia's aim of becoming an international and regional education from about
160 nations. But in my perspective the international students perspective increasing in the tax is
not from their interest specially the implementation of the GST, this is might affect the number of
the international students to be reduced and the target of 200,000 international students will not be
achieved. (Survey by IIUM University 2012)
Coming to the national debt, Central banks of any country always use the tax revenue
generated to recover the country’s expenditures as what the Malaysian government did when the
oil prices increased on 1st January 2015. The government had not had any choice to finance the
country’s sectors unless to issue bonds and to impose the good and services tax (GST) in order to
3. compensate. It had affected the normal residences and also the investors to pay 6% of their
purchases ( Azlan Tajuddin2015).
However, the Malaysian gross domestic product GDP affected when the prices of the oil
decreased and affected more when the government imposed the good and services tax adopted
from (Ministry of finance2014).
The graph above shows Malaysian GDP from 2006-2014.
The GDP was reasonable increasing specially from 2010 to 2014, however in 2015 it fall
from RM338.2 Billion to RM 296.22 Billion which means it decreased by 14.179% and one of the
factors which made the GDP to decrease as mentioned above the tax, which imposed on 1st April
2015.
Lastly, social welfare is recognized as a tenseness or contrariness that occurs in society
due to competing socioeconomic desires and benefits amidst individuals of various classes
and the government(Fatt, 2012).However, even though that the tax slightly high in Malaysia, but
the government tries as much as possible in order to make the society more comfortable. The
government imposed a tax “GST” that can compensate the losing in the oil prices, facing the
government deficit (Ruslan, 2013)
The stander of life in Malaysia has not been heavily affected by the tax. For instance, GST
is not stricken. The taxation system disciplines everybody in the community evenly, including of
both the poor and rich, which will eventually affect the citizens such as financing the 2020 VISION
as mentioned above which will make the country as one of the most technological and developed
4. country in the world, and increasing the gap per capita from RM10, 512.796 in 2014 to RM
10,876.7311 and increasing more through the coming years. But the same time avoided the
borrowing from external sources such as IMF. (Azlan Tajuddin2015).
Lastly, regulating specific undesirable activities. Meaning to impose higher tax to curb such
activities. Examples are smoking, gambling, drinking etc. Undesirable in the sense that all these
activities do not bring any good the person who is consuming them. And also encouraging the
healthcare industries to invest in the country by imposing a lower tax rate. The other positive point
is encouraging the automobile industries to come and to invest in Malaysia by decreasing the tax
for them. (Ruslan, 2013)
In conclusion, Malaysian government should re-look at the good and services tax,
because this kind of tax affects the citizens specially the poor class to be poorer. In addition, the
GST affects the internal as well as the external investors to pull their investments out of the country
to more stable country in term of the economy. Therefore, the government should reduce the tax
in business at least to 4% rather than 6% in order to encourage investors and to attract more to
investments in the country. (Malaysian entrepreneur ( AlBukhary, 2015
Therefore, it’s necessary for the country to take the proper tax measure to be able to pay
back its debts within the proper period of time before going to any kind of bankruptcy. Taxes are
the sources for the country to increase its reserves so that it can improve its trades and have a
backup whenever it’s facing any kind of crisis. A great example of that can be Malaysia during the
East Asian financial crisis, when Malaysia experiencing that crisis and it used its reserves to come
from that crisis ( Uzail, 2015).
I would say that Tax in Malaysia is really important as it is one of the major sources of
the government revenue in order to finance its sectors, avoiding the debt, make the country more
developed in which the government seek to establish lots of projects which will contribute to
provide jobs to the society such as KL118. From another hand, bring the technology into the
country as well as improve the infrastructure and the healthcare institutions as the government is
building one of the biggest hospitals in the country which called as Klinik 1 Malaysia in which the
patient needs only to pay RM 1 in order to be served.
