‘Politically risky’ not to bring back GST, says Ong

 Ex-deputy trade and industry minister Ong Kian Ming says the government will have to introduce or expand other taxes if the goods and services tax is not reinstated.

The goods and services tax was introduced in April 2015 at a rate of 6% before being zero-rated in June 2018. (Bernama pic)

PETALING JAYA:

 Not reintroducing the goods and services tax (GST) can carry more political risk than bringing it back, says former deputy international trade and industry minister Ong Kian Ming.

The former Bangi MP said the government will have to introduce or expand other taxes if the GST is not reinstated, which could be even more unpopular than the GST itself.

Ong Kian Ming.

Ong, now an adjunct professor at Taylor’s University, noted that the current government includes coalition partners who supported the GST when it was first introduced in 2015, which could make its reintroduction more politically manageable.

“Barisan Nasional chairman Ahmad Zahid Hamidi has publicly expressed support for reintroducing the GST after the next general election, thereby opening the door to a politically feasible solution,” he told FMT.

“In addition, many economic realities have changed since the GST was introduced in 2015, including wage growth, the rollout of e-invoicing, and lessons learned from the initial GST implementation,which would make any reintroduction more efficient.”

Ong said the government should build political consensus among all parties and coalitions before reintroducing the GST, a proposal he had previously put forward.

He said this could be paired with measures to improve public acceptance of the tax, such as equal parliamentary constituency allocation, bipartisan monitoring committees to oversee GST claims processing, and regular parliamentary briefings on the implementation progress.

On Feb 12, deputy finance minister Liew Chin Tong told the Dewan Rakyat the government would only consider reinstating the GST when Malaysia’s median wage exceeds RM4,000. The national median monthly wage currently stands at around RM2,800.

Liew said while GST is more efficient and business-friendly than the current sales and service tax (SST), the consumption-based tax places a heavier burden on lower-income earners.

Ong said Malaysia is better prepared for GST now as poverty rates in Peninsular Malaysia had declined significantly, although Sabah remains an outlier with 0.7% of its population classified as hardcore poor.

He said good economic policy would dictate that the B40 community, which would be hit harder by the GST, could be compensated with direct cash transfers and other forms of assistance to cushion the impact.

Mazlan Ali of Universiti Teknologi Malaysia said the GST’s reintroduction would need careful refinement. He cautioned that implementing it immediately could negatively affect political support for the government.

Mazlan Ali.

Mazlan noted that while the GST could strengthen government revenue compared with SST, it remains a regressive tax system.

“Maybe it can be reintroduced in the next term if the unity government wins GE16. Its implementation should start with a very low tax rate,” he said.

“GST can burden the low-income group since it charges the same rate for everyone regardless of income level, which might not have a good political impact on the unity government,” he said.

The GST, a multi-stage consumption tax, was introduced in April 2015 at a rate of 6% before being zero-rated in June 2018.

It was replaced by SST in September 2018 in line with the manifesto of the then Pakatan Harapan-led administration. - FMT