| November 26, 2013
Analysts have been spewing their take on the GST. But, is this tax a necessity in keeping the country afloat?
The much maligned goods and services tax (GST) is seen as a necessary evil by many experts who do not have to worry about the little dent it will make in their pockets, while they overlook the real implications of such a taxing method on the ordinary folks’ wallet.
One analyst attempting to coax the people into believing that the GST would be the downfall of the ruling party said: “Putrajaya’s contentious plan to roll out a consumption tax system in 2015 could give the opposition the perfect campaign fodder.”
The analysts added that it could potentially unseat the Barisan Nasional (BN) coalition in the next national polls. However, I beg to differ with this expert.
Among the most prominent comments of how the GST would benefit the people were those from government officials who defended the GST, which they denied was a new form of taxation, by claiming that it would bring progress and development to the country.
Then, we had the usual suspects such as the think-tanks and the thinly-veiled pro-regime buddies helming the corporations and other vehicles of propaganda who said it was time to introduce the GST or the country would be doomed in a few years.
Amid all the soothsayers, there were only a few doomsday prophets who came from the ranks of the opposition but we will get to that later after explaining why the GST was just another form of money-raking vehicle for cash-strapped BN.
In this perspective, it is wiser to state that the GST would be indeed a money making machine and could probably rake in RM25 to RM30 billion but we are not told of the diminishing returns with the shelving of the other taxes.
In this respect, another soothsayer from the Inland Revenue Board (IRB) whose chief executive officer/Director General Mohd Shukor Mahfar, who seemed comfortable in his post and with his views, said if “we analysed it,” individual and corporate taxes would be lowered to reduce the impact on the people.
Despite Mohd Shukor saying that personal taxes would not “necessarily mean that the government’s revenue would be reduced,” one could not help but wonder how much the government would lose in revenue following the introduction of the GST.
What’s government’s loss?
The fundamental question would be how much revenue would the government lose with the phasing out of the other taxes?
Also, how much of the existing service taxes charged by serviced restaurants and other serviced outlets would be reduced when GSTtakes off?
Meanwhile, Prime Minister Najib Tun Razak who is also the Finance Minister said the GST rate would be among the lowest in the Asean region.
However, the government did admit that it was good to compare Malaysia to its peers since our taxes were “lower”, with Najib proudly stating that Indonesia, Vietnam, Cambodia, the Philippines and impoverished Laos capped their GST at 10 percent with affluent Singapore at seven percent. The PM could be taken to have said it to spite the opposition benches indeed.
Nevertheless, Malaysia’s GST is steep if we were to compare to the United States’ tax. In the US, excluding additional local sales and use tax, state-level sales and use tax rates range from 2.9 percent in Colorado to 7.25 percent in California.
In general, tax in the US is lower when compared to the Malaysian GST – this was omitted in the budget speech.
In the midst of the confusion created when comparing with the taxes in various countries, let us get back to the original idea of this posting – that is, I beg to differ with analysts who are saying that BN is in danger of losing votes in the next GE due to the GST.
As a matter of fact, the GST would be a mean to an end in the replenishment of the BN’s image and coffers even when the PM were to announce larger and even juicier BR1M’s and what nots.
If it is true that during the last GE the BN did pillage the budget with special allocations for the BR1M under the 1Malaysia concept, then nothing would stop BN from using the same excuse to grab twice the amount it spent in GE13, turn GE14 into a razzia or mania for victory.
With such unlimited spending power, the strong opposition that the Pakatan Rakyat (PR) represents today will be a tiny force on the billboards and will be drowned by the massive handouts – perhaps the biggest ever in Malaysian history – that we are about to witness in about four years time.
Hence, the need for Pakatan to stop the GST from being rolled out now in order to prevent BN from laying its hands on a pot of gold that may turn the tables on them for good perhaps for another 50 years?
But what can the opposition do to stop the GST from coming into force? Not much, one would say, though it would be useful for the Pakatan to keep up the fight in parliament and outside the August entity. But, to spill it into street demo’s may instead backfire this time around.
Seriously, there are not many people out there who believed that the masses would join any demonstrations against the GST in a bid to curtail Najib’s regime march forward with the new tax.
Pakatan would have to devise other plans to bring maturity to the debate and make the people and the government understand that the budgetary wastage and other leakage in the running of the nation’s affairs, if properly managed, could bring down the deficit situation.
Running amok in the streets and burning signboards that says, ‘NO TO GST’ would look silly and would not bring the expected results and altogether cause the opposition to lose the respect of some.
What is the way to go about besides the “intellectual” debates? For that, we must wait for another op-ed.
Ali Cordoba writes extensively on local politics.