The government owes it to the people to think out of the box rather than use the goods and services tax (GST) as a quick fix to its budget deficit woes.
A group of economists from various think-tanks came together during a forum in Kuala Lumpur and threw out some ideas to help the government, which has been overspending for last 15 years. While they agreed that it is a good thing to broaden Malaysia’s tax base, since only one in six working adults now pay income taxes, the time to do so was not right now.
“The government has its hands now in your right pocket and now it is just moving it over to your left pocket... the question really is: Is it taking out more money from your left pocket? Yes! It is not revenue neutral,” said Penang Institute executive director Woo Wing Thye, the organiser of the forum.
Arguing that the GST will certainly inflate the price of most essential goods and make the poor suffer the most, the economists said that perhaps the government could cut back spending or raise revenue through other means.
Woo suggested a tax on government-linked companies (GLCs) to rein in their unhealthy windfalls from healthcare and real estate development, mostly derived from crowding out the private sector.
“All GLCS should be contributing more of their profits to the government, like Petronas,” Woo said.
Going back into history, Woo cited that GLCs such as Perwaja Steel and the makers of Proton Saga were originally set up by ex-premier Mahathir Mohamad so that they could partner with Japanese companies and receive a transfer of technology and help drive Malaysia to become an export-oriented economy.
But Woo complained that the current slate of GLCs were just bloated government corporations which were cash rich and grew on chomping up private sector businesses. The government should take back some of their profits and curb their spending sprees instead, Woo said.
Institut Rakyat’s Azrul Azwar said that a tax on gains from shares trading was also more reasonable than GST, as it targets the rich and would also raise more revenue.
He suggested that this could a progressive tax rate from 1 percent to 7 percent depending on how long the shares were held, less than a year to five years. By this calculation, this could easily rake in RM8-RM10 billion a year for the government as there was plenty of speculative traders on the Bursa Malaysia.
Raising the maximum tax ceiling
He also suggested that the government raise its maximum tax ceiling of 26 percent to 30 percent or more, for million-ringgit earners in Malaysia.
Research for Social Advancement (Refsa) director Teh Chi Chang, meanwhile, cited that more tax could be sucked out from the country’s black economy such as unchecked imports of beer, illegal cigarettes and the gambling sector.
He estimated that a third of cigarettes sold in Malaysia had evaded taxes, and a more careful government could easily rake in an extra RM2 billion.
Almost all the economists also cited that taking the recent Auditor-General’s Report seriously would be a good start.
“It is not hard to imagine from the Auditor-General’s Report that the government could easily save some money and still deliver the same amount of services to the people of Malaysia,” Teh said.
Economists said that from an annual budget of RM250 billion, if the government can save just two percent through being more efficient, using open tenders and being more prudent with public money, that means an extra RM5 billion is easily gained.
The GST process, which has been mooted for nearly a decade, was stopped in 2009 after the bill got its first reading in Parliament. It is expected to make a comeback when the 2014 government budget is presented later this month.
“The government has its hands now in your right pocket and now it is just moving it over to your left pocket... the question really is: Is it taking out more money from your left pocket? Yes! It is not revenue neutral,” said Penang Institute executive director Woo Wing Thye, the organiser of the forum.
Arguing that the GST will certainly inflate the price of most essential goods and make the poor suffer the most, the economists said that perhaps the government could cut back spending or raise revenue through other means.Woo suggested a tax on government-linked companies (GLCs) to rein in their unhealthy windfalls from healthcare and real estate development, mostly derived from crowding out the private sector.
“All GLCS should be contributing more of their profits to the government, like Petronas,” Woo said.
Going back into history, Woo cited that GLCs such as Perwaja Steel and the makers of Proton Saga were originally set up by ex-premier Mahathir Mohamad so that they could partner with Japanese companies and receive a transfer of technology and help drive Malaysia to become an export-oriented economy.
But Woo complained that the current slate of GLCs were just bloated government corporations which were cash rich and grew on chomping up private sector businesses. The government should take back some of their profits and curb their spending sprees instead, Woo said.
Institut Rakyat’s Azrul Azwar said that a tax on gains from shares trading was also more reasonable than GST, as it targets the rich and would also raise more revenue.
He suggested that this could a progressive tax rate from 1 percent to 7 percent depending on how long the shares were held, less than a year to five years. By this calculation, this could easily rake in RM8-RM10 billion a year for the government as there was plenty of speculative traders on the Bursa Malaysia.
Raising the maximum tax ceiling
He also suggested that the government raise its maximum tax ceiling of 26 percent to 30 percent or more, for million-ringgit earners in Malaysia.
Research for Social Advancement (Refsa) director Teh Chi Chang, meanwhile, cited that more tax could be sucked out from the country’s black economy such as unchecked imports of beer, illegal cigarettes and the gambling sector.
He estimated that a third of cigarettes sold in Malaysia had evaded taxes, and a more careful government could easily rake in an extra RM2 billion.
Almost all the economists also cited that taking the recent Auditor-General’s Report seriously would be a good start.
“It is not hard to imagine from the Auditor-General’s Report that the government could easily save some money and still deliver the same amount of services to the people of Malaysia,” Teh said.
Economists said that from an annual budget of RM250 billion, if the government can save just two percent through being more efficient, using open tenders and being more prudent with public money, that means an extra RM5 billion is easily gained.
The GST process, which has been mooted for nearly a decade, was stopped in 2009 after the bill got its first reading in Parliament. It is expected to make a comeback when the 2014 government budget is presented later this month.
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