For Petronas’ sake, implement GST

Research group REFSA says Petronas currently contributes one-third of the annual federal budget which the company can otherwise use for future investments.

PETALING JAYA: The government should consider introducing the Goods and Services Tax (GST) to reduce dependence on Petronas to finance its annual budget, said Research for Social Advancement (REFSA) executive director Teh Chi-Chang.

He said currently the national oil company contributed one-third of the national budget through direct taxes, dividends and duties.

The present situation, he added, was not sustainable for Petronas as it would need the funds for future investments.

“And our oil reserves will dry up someday and at that time, the government will need to find other sources of income if the government keeps spending like what it does now,” he said.

Last year, the government backtracked from introducing the GST due to massive public outcry.

The government said it planned to educate the public on what GST was all about, adding that the new tax scheme would not burden the public.

The ‘free’ misconception

In his assessment, Teh said Petronas contributed about 21% of the federal budget in 2003, which stood at about RM22 billion.

“And the amount ballooned to a whopping RM56 billion in 2010, standing at 35% of our national budget,” he added.

Teh said revenue from personal income tax did not add much to the nation’s coffers as only 15% of the national budget was funded by personal taxes or other direct taxes levied on the people.

“That is because only one million of our 10 million strong workforce pay taxes. That’s only 10% of our entire workforce,” he added.

Due to the low direct tax, Teh said, people had the misconception that government spending was free and many lobby for more subsidies and handouts.

“The reality is that the money is coming from somewhere and this is where the cost has been borne by Petronas over the years,” he added.