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Friday, February 28, 2014

A real taxing deal

Posted on 25 February 2014 - 08:12pm
R. Nadeswaran

THE opposition to the Automated Enforcement System (AES) was overwhelming. Even the politicians on the government side did not hide their contempt for what was deemed as the "piratisation" of the enforcement of traffic laws.

It was not the system that was in question, but the methodology used in awarding the "sweetheart" deals to two companies. After all the hoo-ha, the government decided to take it upon itself to implement the system and in the process, has talked about compensating the two firms to the tune of RM400 million.

How the figure was arrived at will continue to be hotly debated.

With 13 months to go before the implementation of the goods and services tax (GST), the policymakers have yet again put their feet in their mouths by entering into a "profit-sharing" agreement with a private firm.

This unprecedented arrangement has been reported in the media and its pitfalls have been highlighted by a financial institution commenting on MyEG's announcement that it had signed a letter of award with the Customs Department to wire up businesses that are required to pay tax to the government.

CIMB Research analyst Nigel Foo says MyEG will get 20% of revenue collected – above a preset base.

This 20% is based on an understanding that 50% of revenue collected will go to the government, while the remaining 50% will go to MyEG's consortium which was awarded the project and in which MyEG has a 40% stake.

"Phase 1 of the project's revenue base case is around RM800mil annually, growing 8% to 9% every year," Foo told clients in a report.

So, in short, 50 sen out of every ringgit that all Malaysians will have to pay in GST will end up in someone else's pocket – not the government coffers.

And mind you, the contract is for a period of six years, commencing from April 1 and this means billions meant for the government will go into "administration, management and collection".

News of this agreement has got tongues wagging and more importantly, this was a "negotiated tender exercise" without open tenders or prior consultation with the stakeholders.

The obvious question will be to ask the need for a third party to collect government revenue. The obvious answer will be that "we do not have the resources and the expertise" which is no longer acceptable.

For the record, let it be said that the department has collected and is continuing to collect government sales tax without any help or support from any outside party.

Shouldn't the department undertake the exercise and make a one-off payment and pay maintenance costs instead of losing half its revenue in perpetuity?

One would have thought that after the AES fiasco, the government would have accepted the need for public consultation and the practice of negotiated deals.

This deal flies directly in the face of the "new" government policy of open tenders which was announced by Minister in the Prime Minister's Department Datuk Paul Low four weeks ago.

These are issues that cause the rakyat to be sceptical and suspicious of the government's grandiose announcements on good governance. First, the AES and now, the GST can be viewed major failures of the much-touted Government Transformation Programme (GTP).

Simply put, this whole exercise is opaque and a re-affirmation that the government will continue to undertake "nego-tenders" with total disregard for transparency and accountability.

What will they think of next? Getting debt collectors to collect income tax?

Clear and consistent

HE's in his mid-forties and is a public figure. Everyday, he's in the newspapers and on television and hence, pays attention to his personal appearance. He's a fitness freak too. When he was on the other side, he used to be cycling around the city centre.

These days, he's chauffeur-driven with armed bodyguards. But the seat he occupies keeps him busy all day and yet he finds time to pump iron at the gym and has a personal trainer.

The operators of the gym did not charge him for the trainer's services, but he chose to make a personal donation to a charity of the trainer's choice.

How do I know this? I visited the website of the House of Commons and he happens to be the British prime minister, his and the interests of all British MPs are available on the website. Need anything more be said about transparency?

R. Nadeswaran says the two divergent perceptions on transparency should be an eye-opener for those who still live in a world of their own. Comments:

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