Really, GST is to help pay salaries, pension for civil servants? – TK Chua

International Trade and Industry Minister, Datuk Seri Mustapa Mohamed, said the goods and services tax (GST) is to diversify revenue source and to help pay for salaries and pension of public servants.

In one stroke, it is hope that GST will gain the support of more than a million public servants and a few hundred thousand pensioners.

Also, by stating that GST is to diversify revenue sources, Mustapha has also implied that present revenue source is too narrow and insufficient to cover the increased expenditure of the government.

Mustapa is a capable minister as far as I know. But in this instance, I am afraid he has allowed politics more than economics to rationalise GST.

I think Malaysia’s existing tax base is already sufficiently broad even without GST. We have income tax, petroleum income tax, royalty (oil, timber, sand, whatever), export duties, import duty, excise, stamp duty, sales and service taxes.

You name it, we have it. In fact, petroleum income tax, petroleum export duty and royalty as well as Petronas’s massive dividends are the new “addition” to Malaysia’s wealth and revenue.

Malaysia should have been able to live comfortably with this new addition alone.

The trouble with us is we have allowed our expenditure to grow in tandem with new found revenue (read: petroleum windfall). As I see it, our country did not spend based on what we genuinely need. We spend because we have windfall with us. This is our biggest problem.

We know oil related revenue is exhaustible and finite. But we spend as if oil related revenue is going to last forever.

So we incur expenditure without thinking and increase the size of the civil service indiscriminately and often just to create employment. In fact, we should have used some of the windfall to set up a fund to make payment of pension self-sustainable.

I think we should not talk about new source of revenue unless we have found a way to contain our expenditure.

GST cannot help to pay public servants’ salaries and pensions when Malaysia’s fiscal account was already in deficit the past 15 years.

I am sure this deficit was not solely caused by salaries and pension of public servants alone.

With petroleum windfall, we would have covered the salary and pension bill comfortably.

But you and I know that the dire straits we are in now is due to causes other than salaries and pensions of public servants.

Until and unless the government rein in all the unnecessary expenditure, please do not blame the civil servants and make the pensioners feel guilty.

* TK Chua reads The Malaysian Insider.