Najib insists GST refunds done by the book, PAC can't find proof

PAC REPORT | In his testimony to the Public Accounts Committee (PAC), former premier and finance minister Najib Abdul Razak said that he had acted in accordance with the GST Act 2014.

However, the committee failed to find proof with regard to one section of the law.

In its report on the delayed GST refunds tabled in the Dewan Rakyat today, the PAC zoomed in on Section 54(5) of the act. 

The act stated that the finance minister had the power to authorise payments from the GST refund account into the government's consolidated revenue account.

“The PAC was not given any documents or written proof that the authorisation was given," the report reads.

“However, Najib and (former Treasury secretary-general) Mohd Irwan Serigar Abdullah concurred that Najib had acted in accordance with Section 54(5)."

In his testimony, Najib explained that he had acted on the accountant-general’s advice and in accordance with Section 54(5) when he decided that all GST revenue would be channelled to the consolidated revenue account.

Irwan, meanwhile, told the PAC that Najib had made the decision under Section 54(5). 

“However, no minutes of it were written or recorded in any of the meetings,” the report reiterated.

Finance Ministry Tax (Policy and GST Implementation) Department head Ezleezan Osman testified that there was no record of such an order, while Irwan’s successor Ahmad Badri Mohd Zahir told the committee that he was “unsure” if any records exist.

Najib blames Harapan’s tax holiday

The report also found that the previous government had contravened Section 54(2) of the act in channelling all GST revenue into the consolidated revenue account instead of the GST refund account.

The money was then spent as part of developmental and operational expenditure.

According to Attorney-General Tommy Thomas (photo), this constitutes a breach of not just the spirit of the tax regime, but also the letter of the GST Act, as well as Section 7 of the Financial Procedure Act 1957.

Najib explained to the PAC that he had acted on the advice of the accountant general to prevent potential “cash flow problems” for the government.

“If there was a pressing need in terms of expenditure involving the needs of the rakyat, we likely used the money to fund projects... this was a priority in the government’s financial management.

“It is a cash flow problem because of the demand by other services for the government that we need to settle, and also development expenditure,” he said.

Najib also told the PAC that the new government could have afforded to pay GST refunds had the now-repealed tax been continued.

“But when you cancelled GST and you give a tax holiday, that is when your problem started. That is the real cause of the problem,” he said.

His “tax holiday” comment was not addressed by the committee in the report.

The PAC launched its investigation after Finance Minister Lim Guan Eng told Parliament last August that RM19.4 billion in GST refunds had been delayed, and suggested that the money had been "robbed."

At the time, Najib denied the charge and claimed that Pakatan Harapan had used up the money after it suffered a revenue loss from zero-rating the GST last June to pave the way for the eventual implementation of the SST.

Following Harapan’s admittance that was it unable to afford the RM19.4 billion in refunds, a special RM30 billion dividend was sought from Petronas. - Mkini