Hamzah’s SST revenue projection is off the mark, says ex-MP

 

An economist says the increase in SST is a progressive move as it does not affect food but on goods bought mainly by businesses and those in the higher-income group.

PETALING JAYA: Former MP and deputy minister Ong Kian Ming has disputed a claim by opposition leader Hamzah Zainudin that the 2% increase in sales and services tax will generate only RM1 billion more in government revenue.

Ong, now a professor at Taylor’s University, told FMT that the actual estimated revenue is projected to be in the range of RM3 to RM4 billion.

“Hamzah should seek clarification from the finance ministry on this point when the minister or deputy minister replies in Parliament,” said Ong, a former two-term MP for Bangi and former deputy minister of international trade and industry. He now heads the politics, philosophy and economics (PPE) degree programme at Taylor’s University.

Ong Kian Ming.

Ong said Hamzah had misinterpreted the projected RM1 billion increase in SST revenue, which had been based on the expected increase in economic activity for 2024, and did not account for the 2% increase in the SST rate announced in the 2024 budget.

Speaking in the budget debate in the Dewan Rakyat last week, Hamzah, who is also Bersatu secretary-general, had asked if the government had conducted a comparative analysis of revenue from the previous goods and services tax and that from the increased SST before the budget was tabled.

He said the increase in SST from 6% to 8% would yield only an extra RM1 billion in revenue, but may result in the overall price of goods in the supply chain also going up.

Geoffrey Williams.

Geoffrey Williams of Malaysia University of Science and Technology said the SST increase was a progressive move protecting the low-income groups, but which might potentially affect certain consumer prices along the supply chain.

He said the higher rate would generate more revenue without broadening the tax base through levying taxes on a wider range of people or a wider range of goods, which would result in people in low-income groups getting drawn into the taxpayer group. This is why broadening the tax base should be avoided,” he told FMT.

Williams said the new SST rate would affect high-income groups more and protect low-income groups, as the higher tax rate is levied not on food, but on items mostly purchased by businesses or people with higher incomes.

However, raising the SST might lead to increased prices of certain goods and services, potentially affecting consumer prices along the supply chain, he said.

Carmelo Ferlito.

Another economist, Carmelo Ferlito of the Center for Market Education, said that augmenting indirect taxes such as the SST was the most effective method for increasing revenue compared with direct taxation, such as income tax.

“This is because collection is easier, and it applies to the generality of the public with little chance to escape,” Ferlito told FMT.

He suggested that such a move might prompt households to adopt austerity measures, potentially boosting savings and reducing consumption, thereby reducing household debt.

“The increased SST should be paired with lower income taxes to make the measure sustainable,” Ferlito added. - FMT