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Thursday, January 2, 2014

Inflation the only certainty with GST, claims Rafizi

DECEMBER 30, 2013
UPDATED: DECEMBER 30, 2013 06:39 PM
The Pandan MP claimed the federal government is prescribing a simplistic view
that does not consider the overall inflation that will come with the
cost of doing business. — Picture by Choo Choy May
KUALA LUMPUR, Dec 30 — Putrajaya is misleading Malaysians into believing the prices of goods and services will fall when the consumption tax rolls out in April 2015, PKR’s Rafizi Ramli said today. 

The first-term opposition lawmaker claimed the federal government is prescribing a simplistic view that does not consider the overall inflation that will come with the cost of doing business.

In singling out Deputy Finance Minister Datuk Ahmad Maslan for perpetrating the claim, the Pandan MP argued that retailers and manufacturers would have no choice but to raise their prices as the controversial good and services tax (GST) would affect every stage in doing business, thereby ending with consumers picking up the tab.

“Ahmad Maslan and the Barisan Nasional simplistically believe that just because retailers and manufacturers can claim a refund on GST paid on their costs, that this will automatically lower their production costs and allow them to lower prices,” Rafizi told a news conference at the PKR headquarters here.

“It’s a given that inflation will rise with the implementation of GST. The costs borne by businesses will go up because inflation goes up, and when the cost of doing business goes up, that means profits will go down.

“Even if businesses can claim on the cost of GST, the refund won’t be enough to offset that due to the overall hike in costs of goods,” he said.

Last week, Ahmad Maslan was reported to have claimed that the contentious new tax regime — which is scheduled implementation in April 2015 — is a cost-cutting measure by the government.

The deputy minister was quoted by news portal The Malaysian Insider as saying that the opposition Pakatan Rakyat coalition are merely using the planned GST as fodder to attack the government.

“Why don’t they want GST? Because when prices of goods and services fall, the opposition will not have any fodder to hit out at the government,” he was quoted as saying.

Rafizi, who is also PKR's strategic director, said there is no basis for Ahmad Maslan's claim that prices will go down as there is no way the government can compel businesses to cut down on their prices.

The opposition leader said as it is, the GST bill that will be tabled in Parliament next year does not have any provision to compel businesses that have claimed their GST refund to lower their prices.

“But Ahmad Maslan and the BN also know that once GST is implemented, prices will go up across the board and because prices go up, it would be unfair to impose such a provision on businesses.

“The government has to stop misleading the public. If you know prices are going up, stop going around telling the people that prices will go down because of the new tax mechanism.

“It is as if it is meant to mislead the public into believing that when prices go up, they will turn their anger on the retailers and manufacturers instead of holding the BN government accountable for pushing GST at a time when the country is not ready,” he said.

Public anger has been brewing against the government over the raft of hikes in rates, and plans to broaden the country's tax base through the GST.

An anti-price hike movement is planning to stage a rally at Dataran Merdeka tomorrow, where the annual New Year's Eve celebration is held, though police have since arrested the group's leader and another person running a Facebook page on suspicion of plotting to overthrow the government.

Since September, Putrajaya has embarked on aggressive cost-cutting measures after pressure grew for it to rein in a chronic budget deficit that traces back to the Asian Financial Crisis of 1997 and which has left Malaysia’s national debt at just below a critical legal ceiling.

It has pledged to bring its overspending down from around 5 per cent of gross domestic product now to 3 per cent by 2015.

Among others, it has reduced fuel subsidies, removed price control for sugar, allowed an increase in electricity tariffs and confirmed the introduction of the GST all within the space of four months.

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