Analysts pan Harapan’s 'No GST' manifesto

Some economists and analysts are not in favour of Pakatan Harapan’s plan to abolish the Goods and Services Tax (GST), a pledge which was included in their manifesto launched on Thursday night.

“The Harapan proposal to abolish GST is highly questionable, as the GST taxes each citizen per consumption and generates sizeable revenue for the government.

“The alternative proposal is to move back to the Sales and Services Tax (SST), which implies that Harapan would still like to tax consumption but under a different name.

“And this through a system which actually amounts to double taxing on the value chain,” said Ideas acting chief executive officer (CEO) Ali Salman to Malaysiakini yesterday.

Describing the Harapan manifesto as an “example of good intention with bad prescription”, Ali said Malaysia joined 160 countries by imposing GST and even then it was at a low rate of six percent with necessary exemptions in place.

Centre for Public Policy Studies (CPPS) researcher Lau Zheng Zhou also pointed out that abolishing GST would not lead to a natural decrease in prices, especially when it will be replaced with the SST.

“SST is something you impose on the producer. When you impose cost on doing business, then the businesses will pass on the cost to the consumer.

“The abolition of GST will not automatically lead to lower prices because prices tend to be sticky,” he said.

Influencing the prices of goods and services has a lot more to do with healthy competition, he explained, as businesses will try to reduce prices in a competitive market.

Instead of abolishing GST, Universiti Tun Abdul Razak economics professor Barjoyai Bardai suggested Harapan redesign the tax system.

“We need to look at GST and really redesign it so that it targets the high-income group and tourists.

“If we impose GST on tourists, then we can export the tax burden and it will not affect our own citizens here in Malaysia so much,” he said.

Harapan has consistently expressed their intention to abolish the GST should they capture Putrajaya in the next general election.

This is in face of statistics which show that the government collected over RM42 billion in revenue from the GST last year.

More justification needed

Harapan leaders maintained they could regain the loss in revenue from the abolition of the GST by wiping out corruption and leakages in public administration.

However, Lau said the opposition coalition needs to provide better explanations on how they plan to fund their various welfare policies.

“They have to give a lot more justification than just saying we will fund it by removing corruption.

“Savings alone from corruption doesn’t seem very clear to me. You have to break down the categories of spending and revenue,” he pointed out.

While he lauded the socialist nature of their economic policies, Barjoyai also expressed concern on how these policies would be funded.

“It sounds like a socialist country’s budget […] to me, it is a good manifesto that will lead us to a more welfare-based economy that will help, especially, the poor and the lower-income group.

“But the challenge in implementing all this is the source of revenue for the government,” he said.

He suggested that proper planning and implementation could help, such as launching the policies one by one over a set period of time.

Another way the government could afford these initiatives was to diversify their sources of income, he said.

However, he warned, if the government revenue was not enough, then the danger is that it may sink further into debt.

“The government may have to end up borrowing and when they start borrowing, then we come back to the issue of national debt,” he said.

Lau also shared the same sentiments revealing that he sees only three ways the government can fund these policies.

They can either increase tax revenue, transfer spending by cutting allocations elsewhere or to increase borrowings, he said.

Hence, he insisted, the opposition coalition should justify their spending with “more calculation and analysis”. -Mkini