Let’s not delay GST’s re-introduction any longer

 

From Walter Sandosam

The debate continues on the goods and services tax (GST). In 2018, the biggest injustice to the continued wellbeing of the economy and the welfare of its citizens was perpetrated by the then opposition which promised the moon and the sun to a rather naïve voting public who were also consumed by the unfolding of the 1MDB drama.

Among these were the rolling back of GST and removal of highway tolls. We know what happened to the latter which is, to this date, a promise unfulfilled. The irony is that the same players are now a unity coalition of mutually distrusting partners in a marriage of convenience.

The GST mechanism was completely dismantled and the sales and service tax (SST) was amplified to try and recoup, at least partially, what was lost in GST collections. Then there was talk on a high value goods tax, which came to nought, and others, like the much rumoured inheritance tax.

An economist keeps on harping that the GST is a regressive tax. It all goes back as to how one manages it so that the poor are not overly burdened. It is, for all intents and purposes, a consumption tax based on spending patterns and widens the tax base, especially on businesses which have taken advantage of loopholes and indulge in tax avoidance. The country is robbed!

That is not denied based on the premise that the more you consume the more you pay as GST. A multitude of other economists are on record to say that its reintroduction should be better managed – namely, a lower rate at about 2% that will not shatter the lives of the poor.

The key factor of GST is that it taxes at each stage of production so that those who have benefitted from being below the tax radar and avoided paying tax due to transfer pricing and the like will now have nowhere to hide. No economist has challenged this assertion!

That the ‘

burden

 is passed to the customer is a fair comment – the more you consume, the more you pay in tax. It affects the wealthy. The poor have limited spending power and consumption patterns.

Another problem on GST implementation that relates to delayed reimbursements on tax claims, especially to SME businesses, is an operational one. Some inept officers in the civil service, who still continue to be mired in strangling bureaucratic red tape need to be taken to task. Surely, the reimbursement process can be sped up.

On a philosophical level, the current unity government is compromised. They were the ones willing to sell their 

soul to the devil

 as it were to gain political advantage. The country had been held to ransom.

The prime minister has openly acknowledged that GST is both transparent and has clarity. In a similar vein, he also acknowledges that in the past he was not in favour of implementing the GST. Many years have passed and whatever the merits of GST reintroduction, any backtracking is an embarrassment to the earlier stance.

One must remember that when GST was in force, many goods were zero-rated, especially those which had an impact on the poor. The extra collections were also channelled back to the most deserving in the form of aid packages, such as Bantuan Rakyat 1Malaysia (BR1M), to the hardcore poor.

Delaying any reintroduction now and waiting for incomes to rise to RM3,000-4,000 is neither here nor there and more importantly is not time bound. In the interim, the government’s debt burden will continue to increase as detailed in the recent Auditor-General’s report commenting on federal debt.

One must remember that civil servants have been given a salary increment and that has added to the operating expenditure of the budget. The corollary is that there is less for development expenditure, hence the country’s growth is stifled. Where is the money to come from?

Economists who keep on harping on 

regressive

 tax should perhaps take a breath of fresh air and look at the world as a whole and how many have implemented a successful GST regime. These countries also have poverty in their midst. Malaysia has the dubious distinction of rolling back GST!

As Malaysia assumes the chair of Asean, perhaps a look at best practices and the degree of permeation of GST regimes in the region will shed some light. Let’s not go counselling new tax tools like e-payment taxes and the like when basics are still not there.

At the end of the day, political will is absent, due either to earlier stances taken or to expose the shallow mindedness of coalition partners, who acted in their own self- interests. The country, as a whole, has a less than optimal tax structure and we continue to engage in unproductive conversations.

Overall, the country’s economy is being shortchanged and debt burdens will be passed to the generations to come. - FMT

Walter Sandosam served as a senior research fellow at a private university, specialising in economics and accounting.

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.