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Thursday, May 8, 2014

Protesters fear GST proceeds will be swallowed by corruption, say analysts

MAY 5, 2014
Protesters hold up a banner against the Goods and Services Tax
(GST) during their march to Dataran Merdeka on May 1, 2014. — Picture by Saw Siow Feng
KUALA LUMPUR, May 5 — Most Malaysians fear proceeds from the Goods and Services Tax will be swallowed up by corruption and government inefficiency, analysts said.

The consumption tax will start in April next year as part of the government’s efforts to increase its tax take. The flat rate tax of 6 per cent aims to widen the country’s tax base. Only about 10 per cent of Malaysians pay income taxes.

“Reporting on wastage such as those disclosed by the Auditor-General’s Report makes people wonder if their tax money will be prudently spent,” Ibrahim Suffian, head of independent pollster Merdeka Centre, told The Malay Mail Online today.

A survey by Merdeka Centre released last week showed that 62 per cent of 1,009 Malaysians polled last month were against the consumption tax.

The independent pollster also noted that comprehension of the GST was still low, with 53 per cent of respondents admitting that they did not understand how the consumption tax would work.

Ibrahim said Malaysians were ill informed about the consumption tax despite Putrajaya’s RM17 million advertising blitz.

“I think people will take it seriously as we get closer to the implementation date. Or rather, pay more serious attention to the ads and government info as we get closer to the start date,” he said.

Dr Lim Teck Ghee, director of think tank Centre for Policy Initiatives, said public resistance towards the GST was mainly due to years of Putrajaya’s financial mismanagement.

“Why must the rakyat be burdened with a new form of tax when the money which is collected is eventually misused by the government?” Lim told The Malay Mail Online in an email interview.

“This concern that the BN has been irresponsible and will continue to be irresponsible, in making use of whatever funds it collects is the fuel behind the opposition,” he added, referring to the ruling Barisan Nasional (BN) coalition.

He said that opposition against the GST cut across political lines.

More than 15,000 people flooded the capital city on May Day to protest against the tax, one of the biggest rallies since the Bersih demonstration in 2012 for free and fair elections.

“If the GST is badly implemented and brings about a higher cost of living, or if our economic growth falters for whatever reason, or if there is another financial scandal, we can expect the anti-GST bandwagon to be sustained and to become a major factor in the political popularity stakes,” said Lim.

Professor Jayum Jawan from Universiti Putra Malaysia said Putrajaya needed to convince Malaysians that the proceeds would be spent prudently.

“Of course people are worried about how taxes are being spent, what is it going to be spent on, is it going to be spent wisely?” Jayum told The Malay Mail Online.

The Auditor-General’s 2012 report released last year highlighted the wastage of public funds across government departments running into the millions, such as the loss of police equipment worth RM1.3 million, RM3 million spent on National Youth Day celebrations that included K-pop groups from South Korea, and the Department of Broadcasting’s vastly inflated purchase of clocks and scanners above cost price.

James Chin from Monash University’s Malaysian campus said Malaysians are against the GST because it is expected to fuel further rises in the cost of living.

“The government claims that in the Klang Valley, inflation is only at about 5 per cent, but you and I who live in KL know that the inflation rate is way more than that. It is at least 12 to 15 per cent,” Chin told The Malay Mail Online.

The poor cannot afford these rises, he added.

The new consumption tax will affect everyone in the country regardless of income.

Malaysia’s proposed GST rate of 6 per cent is the lowest in the region where many countries have a 10 per cent value added tax.

The tax was first announced during Budget 2005 and was originally scheduled to be implemented in 2007 before it was deferred due to fierce public opposition.

Prime Minister Datuk Seri Najib Razak revived the tax in his Budget 2014, a few months after scraping through with a reduced majority in Malaysia’s general election in May.

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