THE PERCEPTION OF TAXPAYERS TOWARD GOODS AND
SERVICES TAX (GST) IMPLEMENTATION IN MALAYSIA

CHAPTER ONE - INTRODUCTION

1.1 Backgroud of Study
Malaysian taxation system is generally divided into two, which are direct taxes and indirect taxes. Indirect taxes are controlled by the Royal Malaysian Custom Department (RMCD) and it consists of four components such as excise duties, customs duty, sales tax and service tax. Direct taxes are under the control of the Inland Revenue Board of Malaysia (IRBM). The IRBM is responsible for all policies relating to direct taxes such as income tax of individual and business, petroleum income tax, real property expansions tax, and stamp duty. From the government perception, taxation is a vital economic tool because it can be employed to regulate the economy, to invigorate economic growth through the granting of fiscal incentives as a principal aim of implementing tax policies and to provide funds for development projects (JeyapalanKasipillai, 2005). The contribution of direct taxes and indirect taxes to government revenue in 2009 amounted to RM78.375 billion (49.4%) and RM28.129 billion (1 7.73%), respectively. This shows that taxation contributes more than 60% to the Malaysian government revenue.

Recently, the Malaysian government established the implementation of goods and services tax (GST) to replace Sales Tax and Services Tax (SST). The GST plan was first raised in 1988 but at the time it was considered unnecessary because the sales tax and services tax was effectively working. Therefore the plan was put on hold until it is deemed appropriate to be implemented. The GST was also included in the government policy such as in the Malaysian New Economy Model (NEM). In the NEM recommendation, GST would act as an important component in reforming the source and distribution of revenue in Malaysia because of it swider tax base.