GST is to bail out the government, says Dr M

Tun Dr Mahathir Mohamad says the recently introduced GST burdens those outside the income tax bracket and is simply to bail out the government. – The Malaysian Insider file pic, May 29, 2015.

Tun Dr Mahathir fired another salvo at the Najib administration today, accusing Putrajaya of burdening the people with the goods and services tax (GST) to bail out the government even as the country registers increasing budget deficits each year.

In his latest blog posting today, the former prime minister said Putrajaya could have avoided imposing the consumption tax on the people by reducing its own costs.

"As for the GST, the additional fund raised through it is at the expense of the people. They have to pay more for everything they buy, which means their purchasing power is reduced. In other words they have become poorer in order to enrich the government," Dr Mahathir said.

"By introducing the GST, the government is actually asking the people, including those who are not in the income tax bracket, to bail out the government.

Even if what they buy is not subject to GST, but the wholesalers who supply the retailers have to increase their price because they have to pay GST. The retailers in turn have to recover the higher cost by charging their customers more. In the end the people have to bear the GST cost."

It was previously reported that the government loses between RM23 billion and RM40 billion a year due to leakages and mismanagement as highlighted in the annual Auditor-General’s reports.

In comparison, Putrajaya is expected to collect RM23.2 billion this year from GST, the 6% consumption tax which was implemented on April 1. But it will only earn RM690 million in net income from the tax which replaces the sales and services tax (SST).

Prime Minister Datuk Seri Najib Razak had said the government would earn RM690 million in net income from GST after deducting RM13.8 billion that was lost from replacing the SST and RM3.8 billion from GST-exempt goods.

Of the remaining RM5.6 billion, RM4.9 billion would be spent on aid programmes, such as the 1Malaysia People’s Aid (BR1M), leaving the government with only RM690 million.

Critics of the GST have said that if the government could cut the amount of money lost through leakages by one third, it would not need to impose the tax.

Dr Mahathir had previously said that Putrajaya should rethink the implementation of the GST as it appears not to understand how the consumption tax worked.

Referring to the BR1M aid, the retired statesman said that the move may be popular but in most cases, the recipients do not really need the money.

"It is far better to educate and train people for higher-paying jobs when incomes would increase substantially in return for work done.

"Raising wages without increases in productivity, increasing the number of holidays, substituting those falling on weekends, fixing high minimum wages, wasting money on luxuries – all these increase government expenditure, resulting in increased deficits.

"With better financial management, the GST need not be imposed on the people," he added.

Pointing out to two government-owned companies, the controversial 1Malaysia Development Berhad (1MDB) and Pembinaan PFI, which have raked up billions in debts after just several years in operation, Dr Mahathir said these only resulted in "unsustainable borrowings".

"And when these adventures lose money, the financial burden of the government is increased."

1MDB has raked up RM42 billion in debts since it began operations in 2009 while Pembinaan PFI accumulated debts of up to RM26.6 billion in just seven years of its inception.

- TMI