The influence of taxation and economic growth on consumers’ burden in Malaysia
Abstract
The tax reformation and economic development in Malaysia have sparked the motivation of this
study to understand the influence of such reform on consumers’ burden. An investigation into
these relationships is important due to the current increase on consumers burden which had
become a popular issue since the introduction of GST in 2015, and the comeback of SST in 2018
to replace the GST. This study intends to provide evidence concerning Malaysian tax reform and
economic growth on consumers burden by examining the influence on price level. It employs the
Autoregressive Distributed Lag Error Correction Model (ARDL-ECM) estimation to analyze
quarterly data for the period 1996-2020. The findings reveal that indirect taxes have negative
relationship both in the short and long run while economic growth is positively related with
consumers’ burden. This outcome rules out the public accusation that the tax reform would cause
the price level to increase hence worsen the consumer’s burden. Nevertheless, it is the economic
growth that consumers need to take advantage of as it positively influences the demand for goods
and services hence increase the price. The study shed further direction for the government in
formulating taxation and economic policies so as not to compromising the burden of consumers