Ministers defend GST, say needed for future

BY MELISSA CHI

OCTOBER 25, 2013

UPDATED: OCTOBER 25, 2013 09:16 PM

A man watches a live television broadcast of Prime Minister Datuk
Seri Najib Razak tabling Budget 2014 in Parliament in Kuala Lumpur October 25, 2013.
— Picture by Choo Choy May

KUALA LUMPUR, Oct 25 — Cabinet ministers banded together today in defence of Putrajaya’s introduction of the contentious goods and services tax [GST], saying it would prepare the country ahead of a challenging economic climate.

The Second Finance Minister Datuk Seri Ahmad Husni Mohamad Hanadzlah said he is confident that the new consumption tax will not burden Malaysians as the lower income group is being assisted by the 1 Malaysia People’s Aid (BR1M) cash aid scheme.

“The Budget 2014 is to prepare Malaysia to face a more challenging environment, [and] one of the measures that the government has introduced is implementing the goods and services tax.

“We also ensure that society that needs help would be benefited from what we have implemented such as BR1M.

“I am confident that the [implementation of GST] would not burden the rakyat; there are already 100 countries exercising GST including developed and developing nations,” he told reporters.

The GST, which will replace 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, Prime Minister Datuk Seri Najib Razak announced today that personal income tax would be reduced by 1 to 3 percentage points, depending on the income bracket.

Minister in the Prime Minister Department Nancy Shukri said the introduction of the new tax system would prepare Malaysia in becoming a developed nation.

“We reduce subsidies, this is how the economy is balanced. This is actually what is practised in so many developed countries so I think we are already going towards a developed nation stage by stage and this is how they work the budget

“I’m glad our government is daring enough to introduce this kind of Budget this time,” she said.

Minister in the Prime Minister’s Department Datuk Seri Abdul Wahid Omar stressed that the GST Bill had been presented in December 2009 and that the people had “ample time” to prepare.

“I think there is a lot of misconception and a lot of misleading statements being made, particularly by the Opposition members.

“We must bear in mind that this is not a new tax; this is a tax to replace the current Sales and Services Tax, so its not an additional tax per say.

“We are starting to introduce at a reasonable rate which is at 6 per cent, the same level as the current service tax and the lower than some of the sales tax that we have at 10 per cent but it is also the lowest rate to be introduced at ASEAN and one of the lowest in the world as well,” the former Malayan Banking Berhad (Maybank) chief executive officer said.

He added that the government has taken into account the sustainability of its finances and the commitment to lower the fiscal deficit from 4 per cent to 3.5 per cent next year and to 3 per cent in 2015.

Meanwhile, Youth and Sports Minister Khairy Jamaluddin said the 6 per cent rate is reasonable but it may have a short-term effect, in terms of higher prices for certain items.

“But for the long term, I think this is the best for us to change our tax base, [the government] has given enough notice for more than a year.

“We went through the figure, if it is anything less than 6 per cent the additional revenue to the government would not be that high.

“So at 6 per cent is fair in the sense that the inflationary rate will be moderate but the revenue that the government will get will also be increased, not significantly but enough for the time being,” he said.

Prime Minister Datuk Seri Najib Razak had earlier said during his speech that it is the best time to implement GST as the inflation rate is low at 2 per cent.

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