Prepaid tax will only make telcos richer, says Pakatan

The soon-to-be imposed service tax for prepaid mobile reloads and starter/SIM packs is merely a ploy to further enrich local telecommunications companies at the expense of the less fortunate, said Pakatan Rakyat.

PKR vice-president Tian Chua claimed that the bulk of prepaid mobile users are those from the lower income groups and youths who do not earn much, and that the timing of the tax imposition is “not appropriate and not justified”.

“Telcos will use the excuse that since people using post-paid services pay the tax, they just want to be consistent (by imposing tax on prepaid users).

“Our argument is that this is not true. As prepaid users you have to pay upfront, so the government has already taken your money. There is also a lot of residue (in prepaid credits), and the way they schedule (credit usage), you cannot utilise (credits) fully.

“The telcos will just get bigger profits. We totally object to such imposition of tax at this stage,” he said at a press conference today.

Yesterday, local mobile telecommunication companies issued a joint statement to announce the Sept 15 implementation of a six percent service tax on reload and starter/SIM pack purchases.

The companies explained that the service tax is a consumption tax that is chargeable to the customer, as provided for in service tax laws. It will be similar to the service tax levied on food and beverage purchases from restaurants and hotels.

Tian Chua said there is no good reason for the telcos to impose the tax now, claiming that the companies are already earning substantial revenue from the prepaid segment, though he did not give any figures.

“Six percent is a lot. They (telcos) should stop adding hardship on poor consumers,” he said.

'Drop IWK privatisation'

On a separate issue, DAP's Bukit Bendera MP Liew Chin Tong stated Pakatan's opposition to the proposed buy-over of Indah Water Konsortium (IWK) by a consortium led by 1Malaysia Development Berhad (1MDB), questioning the rationale for bailing out the ailing national sewerage company a second time.

He argued that instead of privatising the country's sewerage management, it would be more efficient to hand it over to the state governments and local councils since it is part and parcel of the water industry supply chain.

Yesterday, The Malaysian Insider reported that the 1MDB consortium plans to buy over IWK for RM1 and take over its debts which include over RM1.5 billion in loans still owed to the federal government.

The new consortium wants a 60-year concession from the government, only paying back the principal amount and interest on the loans over the long term. There are also plans to link sewerage charges to water usage.

The first time IWK was bailed out was in 2000 under the then-prime minister Dr Mahathir Mohamed's privatisation plan, as the company faced some RM700 million in debts.

PKR vice-president and Lembah Pantai MP Nurul Izzah Anwar stressed that the federal government must come clean on the negotiations between IWK - which comes under the Energy, Green Technology and Water Ministry - and 1MDB, to avoid the public furore that followed the first bailout.

“Nothing has been disclosed to the public. We are talking about an institution that has bled (taxpayers' money) since 1994. This is one of our many black holes.

“Not much can be done once the takeover takes place, just like in the MAS-AirAsia deal. No matter how much the unions make noise, it won't change the situation,” she said, referring to the controversial share swap between the two airlines.