When GST was implemented on 1 April 2015, Malaysians from all sectors were angered by and doubtful about the tax system. Despite the repeated reassurance by members from Barisan Nasional that GST will benefit Malaysians, many just do not feel it. Over the course of 2.5 years since GST was implemented, consumers are paying higher price for most of the goods, many small businesses experienced higher business costs which partially contributed to rise in prices of goods, and lost customers as a result of lowered consumption in the market. Some businesses were even forced to close down.
Let’s not forget that when GST was introduced, Malaysia was facing other economic challenges such as weakened Ringgit, O&G crisis, loss in market confidence due to financial scandals, slower market activity which led to retrenchment and job cuts, as well as persistently increasing cost of living in contrast to stagnant wages increment.
Nothing was felt by the Barisan Nasional government. The Prime Minister even took pride in the introduction of GST and made the infamous remark of “GST saved Malaysian Economy” which sparked anger amongst most Malaysians. Recently, the show continues by having ministers attempting to soothe the people by saying Malaysian economy is doing just fine because we have good GDP growth. These are attempts to justify the implementation of GST which was actually a trick to save the economic troubles created by Barisan Nasional.
One of the most heated arguments when Pakatan Harapan proposed abolishment of GST (in reality, zero-rating GST) was that a loss of RM42 billion revenue to the government will potentially paralyse Malaysian economy and burn a hole in government’s pocket.
So, is eliminating GST a myth?
In the Alternative Budget of Pakatan Harapan, which was launched at the Parliament today (25 October 2017), Pakatan Harapan has presented detailed explanations as to how Pakatan Harapan can afford to eliminate GST when the pact comes to power.
In 2017, GST collection is expected to be at RM42 billion. If we look at the pre-GST time where Sales and Services Tax (SST) was used, the collection was around RM16 billion a year. That is an additional RM26 billion taken away from people and hence reducing the spending power of the people. This explains the lower consumption rate and slower market activity, on top of other economic problems we face.
The collection of GST was not a matter of “taking money from left pocket to right pocket”. Theoretically, neglecting administration cost and other transfer cost, if the money collected was fully spent by the government in the market, aggregate demand, consumption activity, or even spending power of the people should stay the same or even improved if allocation of resources was properly managed and administrated. However, this did not happen in Malaysia.
Allocation of resources has remained questionable to most Malaysians. For instance, we witnessed cut in allocation to healthcare and education sector during previous budget, but a generous RM59 billion (USD14 billion) is on its way to strengthen US economy. This contradicts the “GST saved Malaysian economy” remark as RM59 billion is equivalent to 18-months of GST collection from 1 April 2015 to 31 October 2016 - our saviour is abandoning us to save US!
The Alternative Budget of Pakatan Harapan has shown us how the act of eliminating GST itself will induce revenue to the government due to expected increase in consumption and business activities. The equation is straightforward - higher consumer spending power, higher consumption rate, higher profits by businesses, higher taxes and duties revenue to the government. An immediate reversal to the dampened market activity is much needed at this moment as this will not only benefit the businesses but people because it means more jobs, better salaries and stronger purchasing power.
During “Himpunan Sayangi Malaysia, Hapuskan Kleptokrasi”, Pakatan Harapan has pledged itself to tackle wastage and corruption problems in Malaysia. Amongst the steps proposed are strengthening the power of MACC and reinstating its independence, practising open tender and eliminate direct negotiation for government projects, and recovering money and assets misappropriated in financial scandals. This signifies a new hope for Malaysia because there has been enough resources disappearing from our economy as a result of wastage and corruption. When wastage and corruption can be reduced, prevented and eventually eliminated, no taxpayers’ money will go to wrong hand and more money actually reaches the people for its intended use.
The spending pattern by the government has always been questionable. For example, there is an enormous amount of resources currently being held by the Prime Minister's Department (PMD). In Budget 2017, 6% of the whole budgeted expenditure was allocated to the PMD, which amounted to around RM16 billion. Many of the items listed in the breakdown of PMD expenditure such as “facilitation funds” and “special funds” received no further explanation on its nature as well. In the Alternative Budget, Pakatan Harapan is confident that at least half of the allocation to the PMD can be saved and put to better use.
With better governance and integrity in management of resources, we do not need GST to “save Malaysian economy”. Pakatan Harapan can do it and Pakatan Harapan will do it.