26-08-2008: No plan to abolish 5% service tax
by Yong Min Wei
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KUALA LUMPUR: The government does not plan to abolish the collection of the 5% service tax which has been operational through the Service Tax Act 1975, said Deputy Finance Minister Datuk Kong Cho Ha.

Kong (Lumut-BN) said the revenue collected from the 5% service tax totalled RM3 billion last year and that the government considered service tax among its major sources of income.

Nevertheless, the deputy minister said the government had since July 1, 2008 increased the sales threshold for the collection of service tax for non-hotel restaurants from RM500,000 to RM3 million annually to reduce the burden on consumers following the June fuel hike and increasing costs of essential items.

“The increase in threshold means operators of non-hotel restaurants would only need to apply for service tax licence if their daily sales hit RM8,333 per day,” he told the Dewan Rakyat in reply to an oral question from Mohd Nor Othman (Hulu Terengganu-BN) whether the government intended to abolish the service tax.

Mohd Nor also wanted to know the measures taken to ensure service tax charged by operators were collected by the government.

Kong said the increase in threshold would help consumers distinguish between the status of restaurants as well as provide consumers a choice whether to dine at restaurants which imposed service tax. He added the increase in threshold would cost the government losing some RM182 million for the year.

He noted that Royal Customs of Malaysia had increased its post audit activities on licensed collectors of service tax to ensure that the 5% service tax collected were remitted to the government.

“Penalties and compounds would be imposed if licensed collectors failed to comply with the Service Tax Act and did not remit on time,” he added.

Service tax is imposed on a number of categories including restaurants at hotels, hotel accommodation, recreational clubs, parking services, golf courses as well as professional consultancy firms such as accountants, lawyers, consultants and engineers.

To a supplementary question by Dr Lo’Lo’ Mohamad Ghazali (Titiwangsa-Pas) whether the 5% tax imposed by the government could be shared between the operator and consumers, Kong said the service tax was strictly imposed on consumers and that some operators were subject to corporate tax on their business income instead.

“The operator is just a collecting agent for the government to obtain the 5% tax from consumers and it would not be fair for the operator to absorb the service tax,” he said.