Goods & Services Tax (GST) Malaysia: GST just plasters over BN’s spending cracks, says Pakatan

Friday, November 1, 2013

GST just plasters over BN’s spending cracks, says Pakatan

BY SYED JAYMAL ZAHIID

OCTOBER 25, 2013

UPDATED: OCTOBER 25, 2013 11:10 PM

Datuk Seri Anwar Ibrahim shaking hands with Lim Guan Eng while
holding a copy of Pakatan Rakyat’s alternative Budget 2014 in Parliament
in Kuala Lumpur October 25, 2013. — Picture by Saw Siow Feng

KUALA LUMPUR, Oct 25 — The Barisan Nasional (BN) government was introducing the controversial goods and services tax (GST) to conceal its own financial weaknesses responsible for the country’s chronic deficit, Pakatan Rakyat (PR) lawmakers critical of Budget 2014 said today.

Opposition Leader Datuk Seri Anwar Ibrahim said the Najib administration had failed to announce much needed structural reforms in its new Budget and instead used a “regressive” tax system to make up the billions of ringgit lost from “leakages” and corruption.

“There was no consideration to address the leakages of billions of ringgit, wastage and good governance.

“So they are desperate to resort to new tax measures to conceal their weaknesses,” Anwar, a former finance minister, told reporters after Prime Minister Datuk Seri Najib Razak tabled Budget 2014 in Parliament here.

DAP secretary-general Lim Guan Eng echoed the view and said BN’s financial plan for next year lacked genuine ideas for improved governance but instead focused on covering up the waste of taxpayers’ money.

“We feel that this is a Budget that is drafted to redeem the waste of people’s money perpetuated by the Barisan Nasional government.

“They were like Santa Clause last year when they gave handouts,” Lim told reporters, referring to the expanded cash aid programme under the 1 Malaysia People’s Aid (BR1M) meant to help the poor.

The Penang chief minister also noted that despite the government’s increased revenue, only RM2 billion of the federal deficit was reduced.

“This meant that they have been overspending,” he said.

The Najib government moved to allay concerns over its fast-rising debt today, announcing a new consumption tax at a surprisingly high rate, abolishing subsidies on sugar and hiking property taxes to dampen a surge in home prices.

Najib in his annual Budget speech to parliament announced his government would bring in a Goods and Services Tax (GST) in 2015 at a rate of 6 per cent, above market expectations of 4 or 5 per cent.

Putrajaya was under pressure to take bold steps after Fitch ratings agency in July cut its outlook on Malaysia’s sovereign debt to negative, citing poor prospects for reform following a divisive May election.

The opposition have steadfastly opposed the GST which it described as “regressive” and hurtful to Malaysia’s poor and middle income group.

Although PR had said it is not against the consumption tax system, the pact insisted that Malaysia was not ready for the GST due to its generally low wage structure.

“I am very upset. We have not met the preconditions for the GST. Like it or not, I think we are looking at a regressive tax regime... we are looking rising inflationary rates,” Anwar’s daughter and popular Lembah Pantai MP Nurul Izzah told reporters in Parliament here.

PR said its shadow budget, released yesterday, would still be able to push growth at 5 per cent without implementing the GST.

The replacement to the current Sales and Services Tax comes amid public concerns that it will increase the cost of living through a hike in the inflation rate, especially after a fuel subsidy cut in September.

To offset the new tax, Najib also announced that personal income tax will be reduced by 1 to 3 percentage points, depending on the income bracket.

A one-off payment of RM300 under the 1 Malaysia People’s Aid (BR1M) will also be made following the implementation scheduled for April 1, 2015.

But Kluang DAP lawmaker and economist by training Liew Chin Tong said the BR1M payment would not be enough to offset the tax the poor will pay under the GST.

“Those who are at the bottom 60 per cent would be most affected. They won’t be compensated by the increase in BR1M. BR1M is minimal,” he told reporters.