Why object to everything govt does, economist asks opposition

Instead, opposition should come up with workable solutions, urges Amir Baharuddin.

PETALING JAYA: The ruling government and the opposition need to work together instead of criticising one another, said economist Amir Baharuddin.

Amir: Building a nation is a national effort. It involves all the people. There’s a lot of mistrust in Malaysia.

Speaking to FMT, he said both sides must focus on developing the economy.

He said the government has designed a budget to suit the present economic situation.

“It is not the easiest job to do.

“You see, we’ve barely recovered from the 1997/1998 Asian financial crisis. And following that was the 2008/2009 global financial crisis. We have to yet fully recover from these crises.”

Amir was responding to economist Bruce Gale, formerly a partner at the Hong Kong-based Political and Economic Risk Consultancy, who said unpopular decisions such as the removal of subsidies and the implementation of the goods and services tax (GST) were “broadly appropriate” to boost the economy.

Implementing the GST was also necessary to force the middle class to share the tax burden, Gale said in a report by Singapore’s Straits Times.

GST was implemented in April 2015. It is a form of consumption tax which is currently fixed at 6% in Malaysia.

The tax is unpopular with consumers who feel the pinch of rising prices, especially with a weakening ringgit and the opposition organising anti-GST campaigns.

The government collected RM38.5 billion in GST last year and expects to collect RM40 billion this year.

Najib has characterised the GST as a “saviour” of the Malaysian economy, helping to make up for the lower revenue from cheaper crude oil exports.

“Building a nation is a national effort. It involves all the people. There’s a lot of mistrust in Malaysia,” Amir said.

“Take a look at the opposition. They always object to everything set out by the government when they should be working together for the sake of the nation.”

He said rather than objecting to every initiative implemented by the government, the opposition should come up with a workable solution that will not jeopardise the nation and move it forward.

“I have been with the opposition at many panel discussions. They object to everything.

“They always say the data from the government is faulty. That kind of perception is not right.”

Amir said they also gave no workable solutions for their so called objections.

Good policy but lacks proper explanation

If a tax policy is well developed and has pro-market leanings, it will not impede economic growth, says Hoo.

Another economist, Hoo Ke Ping, said the GST is nothing new. It just replaces the former sales and services tax (SST) of 5%.

SST was a consumption tax similar to GST and implemented since 1970s. It was imposed generally at the level of the manufacturer or consumer, using taxed services. SST tax used to vary from 5% to 10%.

One major loophole in this tax was that it allowed traders to set the rates themselves, while the GST informs consumers clearly the rate is 6%.

In this sense, Hoo said Prime Minister Najib Razak’s office had failed to explain clearly to Malaysians this matter.

This had resulted in the nation still thinking it is a new form of tax.

“There were inherent weaknesses in the SST which contributed towards double taxation, transfer pricing and absence of complete relief on exported goods and services. And this could result in the increase of activities for the shadow economy,” he said.

A shadow economy refers to illicit economic activity such as black market transactions or undeclared work that exist alongside a country’s official economy. It is untraceable, and hence results in untaxable business dealings.

Finance ministry data show that the shadow economy, or the underground economy, as some will call it, was 30% of the country’s gross domestic product.

“If a tax policy is well developed and has pro-market leanings, it will not impede economic growth.

“People need to know this, but the government somehow seems vague about publicising what is good for the nation,” said Hoo.

There are other alternatives

Wong says fiscally, it is very important to eliminate wastage and corruption on the expenditure front.

Kelana Jaya MP Wong Chen said Gale was mixing up economic policies and fiscal policies.

Wong told FMT, eliminating subsidies and implementing GST are fiscal policies but this is only one side of the fiscal coin.

“He has ignored the expenditure side which is riddled with wastage and corruption. He has also failed to look at off-balance sheet financing, which is where all the mega project funding is hidden.”

Wong, who heads PKR’s commerce and investment bureau, said fiscally, it was very important to eliminate wastage and corruption on the expenditure front.

“If we save on corruption and wastage in buying equipment and building facilities which are then not used, Malaysia would have around RM20 billion in savings,” he said.

Wong said this, in turn, would generate revenue from personal income tax and corporate tax.

“Hence, this will bring back a high level of democracy and accountability to minimise capital outflow and stop the brain drain.

“Only with the creation of a large, strong and vibrant middle class can Malaysia achieve a mature and competitive economy,” added Wong. - FMT