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Saturday, November 30, 2013

GST: Rakyat bails out government

The government tries to cover the fact that it is broke but all its explanations are flimsy and faulty.
COMMENT
Prime Minister Najib Tun Razak has recently mentioned that GST (Goods and Services Tax) was a more equitable taxation system and the additional revenue would allow the government to finance future developments.
He also said that the current taxation system was not efficient as only 1.34 million workers out of 14 million workers paid income tax.
This was reported in an English local daily dated Nov 28, 2013.
His statement regarding the number of taxpayers is downright silly. The small number of workers paying income tax is because many workers are not taxable as they are low-wage earners. This shows how much he knows about economics.
He is just simply trying to rally the people to getting round to accepting GST because before this he was saying that Malaysia’s economy was robust and resilient. He even pointed to Moody’s encouraging upgrade in rating for Malaysia from ‘stable’ to ‘positive’.
As mentioned in a previous article by this columnist, most people preferred the GST to start at 3% or even 4% the most as 4% was the figure touted before the 13th general election. After the polls, 7% was the rate proposed by the government.
Is the final figure of 6% a sort of psychological mind game by the government to show that they are ‘caring enough’ to reduce the rate by 1%?
Singapore started their GST implementation at 3% on April 1, 1994 and it stands at 7% now. Great Britain started implementing VAT (Value Added Tax) on April 1, 1973 and currently it stands at 20% – this is okay as it is 20% after four decades.
Some analysts opine that GST in Malaysia could reach 10% by 2020. If it is true, then it is ridiculous. Why such a quick and steep increase? One has to take note that GST will be implemented on April 1, 2015 and if there is any increase in 2020, it should only go up by 1% to 7%.
A quick and substantial increase can only mean one thing – that the BN government is in a dire financial state and they also know that the rakyat will realise this if GST is implemented before GE13. Otherwise, why not implement GST in 2011 or 2012? This shows that the government, knowing that the GST will be unpopular was merely holding on to its implementation until after GE13.
Government has failed
The government tries to cover the fact that it is broke but all its explanations are flimsy and faulty. The increase in the cost of living due to the rise in petrol price is clear evidence that the government has failed in managing the nation well.
This columnist reiterates that the nation is in financial trouble because it is having difficulty in servicing its loans.
This is very obvious as everything will be going up including electricity tariff and toll rates not to mention assessment. More increases in various sectors are in store early next year.
Let us revisit this issue of the nation’s financial health.
Malaysia’s reserves currently stands at less than RM500 billion, around RM460 billion to be more exact. The national debt stands at RM541 billion (official figure) but if you add contingency liabilities of RM140 billion plus drop-in-value of the Ringgit, the national debt is at least RM700 billion and this is already a conservative estimate.
The difference between the RM700 billion debt and RM460 billion in reserves is just too massive. Therefore the nation is certainly having a problem in servicing its national debt, hence the need for the GST to assist in servicing this big debt.
Cutting down mega-spending, curbing corruption and plugging wastages and leakages is the solution but instead the government turns to the rakyat for funding. Signs of a Grecian implosion is still possible because instead of using the oil money (Petronas’ earnings) to finance the national debt, the oil money is being siphoned off.
To sum up, we the rakyat are bailing out the BN government by servicing its national debt.
Thus we must not say, “I don’t care about the national debt” because this problem is definitely a scourge on our pockets.
The government is downright inefficient and the whole thing is going to blow up soon enough. How long can this situation be concealed?
It is akin to removing the time-bomb from your lap and putting it under your seat. We can do nothing except to brace oneself for the impact, GST or no GST.
Selena Tay is a DAP member and a FMT columnist.

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