Despite slump in oil prices, we could have managed without GST

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Cartoon courtesy of cartoonkafe.com and Merdeka Review

Anil Netto counters Najib’s assertion that the government had foresight in implementing the GST now that revenue from Petronas has plunged.

I don’t know about you, but I didn’t watch Najib’s Budget 2016 speech. I thought it would be too painful to listen to. Not just because of the bad news but because of the thought of what could/might have been.

For a start, contrary to mainstream business wisdom, we could have managed without the regressive goods and services tax. It is regressive because it has passed the burden of tax from the rich to the entire population, even those who are poor.

The GST is expected to raise RM27bn this year since its implementation on 1 April 2015. Compare this to the revenue foregone of RM13.8bn from the discontinued sales and services tax, as estimated by Najib last October. So that means we have stumped up almost double the amount in consumption taxes.

This RM27bn raised from GST this year is also much higher than Najib’s October 2014 forecast of RM19.4bn (RM23.2bn GST – RM3.8bn exempted items).

No wonder Malaysians are hurting.

In 2016, GST is expected to rake in RM39bn, burdening the rakyat even more. According to Najib, the discontinued sales and services tax would have raised only RM18bn, hardly enough to compensate for the drop in oil prices – or so he says. So, again this means we are coughing out more than double in consumption taxes.

And what have the rakyat got to show for these higher taxes? Some token allowances, a slightly higher minimum wage (including for those in the civil service), a measly additional RM50 (from RM950 to RM1,000) in BR1M. The total BR1M payout will rise from RM4.9bn in 2015 to RM5.9bn in 2016.

This is chicken-feed, which will hardly compensate for the huge RM39bn consumption tax that people will have to fork out in 2016.

And that is not counting the impact of higher food prices, higher highway tolls, higher electricity tariffs, etc. The higher highway tolls alone are expected to squeeze Malaysians who rely on the roads to get to work.

And with the budget for higher education being cut and subsidies being slashed, will Malaysians have to pay more for university fees, electricity, train fares and rural flights before long?

Some might fall for Najib’s argument that the government’s decision to impose the GST now looks prescient given the slump in oil prices. Najib said that when the oil price was $100/barrel, the annual revenue for the government from Petronas was RM62bn. In 2015, the government’s revenue from Petronas has plunged to RM44bn (19.7 per cent of total government revenue). Next year, the revenue from Petronas is expected to slide further to RM32bn (only 14.1 per cent of total government revenue). That’s a drop of over RM30bn.

So how else could the government have raised this RM30bn to make up for this shortfall in Petronas revenue if not for the GST?

Well, for starters, the Najib administration shouldn’t have spent like crazy when the oil money was flowing.

It should have been more prudent in say, defence spending, which now comes up to RM17bn compared with RM11bn in 2010. Who is our big enemy that we have to spend so much on defence?

How about slashing the budget of that behemoth, the PM’s Department, which is now RM20bn compared with RM12bn in 2010?

And what about the money lost to corruption, cronyism, inflated contracts and cheap concessions for timber and mining? Pemandu noted that a World Bank study in 2010 estimated that “corruption could cost Malaysia as much as RM10bn a year, or 1–2 per cent of GDP”. That was five years ago and could be a gross understatement.

In 2012, one government minister admitted that corruption costs Malaysia RM26bn every year. What would the figure be by now? RM30bn? So, if we can cut corruption down to a minimum, we could easily save RM20bn.

And why did the government sell all that land so cheaply to 1MDB? For evidence of this, look at the RM5bn in revaluation surpluses which 1MDB has included in its books since its 2011 financial year. If they hadn’t been sold to 1MDB so cheaply, these assets would have remained in the public domain, and so too would those revaluation surpluses. And we haven’t even begun talking about all those other 1MDB ‘investments’ and other public land sold cheaply.

Oh, if the government looks hard enough, perhaps it can find a further RM2.6bn to put in public coffers <wink>.

If the government was so tight on funds, why did it keep trimming corporate tax rates and the upper bands of the income tax in previous years? Only belatedly is it now trying to buck that trend and move towards a semblance of a progressive tax system.

So we do have enough there to cover the drop in revenue from Petronas, without the need for GST to “expand the tax base” and burden hard-pressed Malaysians, don’t you think?

Malaysians shouIdn’t be so easily duped by Najib’s argument that we need the GST – not when there are so many ordinary people who are so lowly paid they are not even eligible for income tax, much less a regressive and burdensome consumption tax.

It is clear that the BN government has unfortunately adopted the neo-liberal model which brings with it the  regressive GST, the removal of subsidies for essential services, and the adoption of a ‘user-pay’ model irrespective of whether the people can afford to pay for these goods and services.

This neo-liberal model, along with imprudent spending, rampant corruption and the selling of public assets on the cheap to crony interests, is the source of much of the rakyat’s pain.

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Dr Abdollah SallehAriffBill Recent comment authors
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Dr Abdollah Salleh

Aliran Editor, I think Saudara AnilNetto completely missed the point. GST was scheduled to be implemented by the government during the third quarter of 2011, but the implementation was delayed until 1 April 2015. Its purpose is to replace the sales and service tax which has been used in the country for several decades. The GST is intended to be a more equitable tax rectifying the fact that only 10% of citizens pay income tax. If more people pays tax (in any form) the government will have more revenue. In fact, the Goods and Services Tax Bill 2009 was tabled for its first reading at the Dewan Rakyat on 16 December 2009 long before the falling price of crude oil was an issue (oil price slump began end of June 2014). So to impugn that GST was introduced to compensate for falling oil prices is incorrect. It just so happens that by default GST has become a saviour for the Government in compensating for reduced income from falling commodity prices. An interesting side effect of GST will occur soon. To be able to collect GST and exempt themselves from collecting it, companies,traders, contractors and professionals (like private doctors and dentists)… Read more »

Bill
Bill

True combating corruption could save money, but that would not materialise in a short time and therefore such step would not be able to immediately cover the fall in oil price.

Ariff
Ariff

Except that we’ve been talking about combating corruption since the time of Pak Lah. And we are talking about corruption from the highest public office. Isn’t “having” 2.6 billion considered corruption too? Isn’t “losing” 42 billion corruption too? That’s no joke amount.