The Government is Insincere about GST

As far as the implementation of Goods and Services Tax (GST) is concerned, the Barisan Nasional has turned lying into an art form in the 2013 Budget.

On the one hand, the Finance Minister desires to assure the financial sector that the federal government has the means to continue to finance wastages and corruption without having to reform the crony infested economic structure.

On the other hand, he is fully aware that imposing a new and blanket consumption tax on a relatively poor population is a path full of challenges.

Paragraphs 80-83 of the Budget Speech by the Finance Minister is a coded signals to the financial sector of the imminent implementation of the GST.

“80. Apart from the transition from bulk subsidies to targeted subsidies, a review of Malaysia’s taxation system will be continued to ensure the taxation system better reflects the household’s financial position. The transition from income based taxation system to a more comprehensive and fair taxation system will eventually benefit the rakyat.

81. The measure will not be implemented hastily but through a thorough study and in an orderly manner. It will not affect the rakyat, particularly the medium and low-income groups as all the basic needs such as food, housing or public transport will always to be protected.

82. Implementation of the new tax tructure is a national imperative to ensure the Government’s finances remain strong for future generation. The Government will not shrink from taking right action although it is challenging.

83. However, the Government will give the sufficient time to all parties to make the necessary adjustment. Public acceptance of this new initiative will be solicited through information programmes, education and extensive consultations.”

Paragraph 145 shows clearly that the 1 percentage point tax cut is part of the GST package, which essentially means whatever one gains from the cut would have to be paid back through the GST eventually.

“145. In the transition process from the current tax system, based on income to a tax system that is fairer, the Government proposes that individual income tax rate be reduced by 1 percentage point for each grouped annual income tax exceeding RM2,500 to RM50,000.”

The Prime Minister’s budget speech clearly contradicts those in his cabinet.

Just last April, when queried in parliament on the link between GST and TUKAR (Small Retailer Transformation Programme) the Deputy Minister of Domestic Trade, Co-operative and Consumerism blatantly issued a denial, stating ” TUKAR program has nothing to do with GST.”

This is despite the Ministry’s website stating the following objectives for TUKAR -an EPP that aims to modernise traditional retail stores under the flagship National Key Economic Areas (NKEA):

– developing local traditional sundry shop (mom and pop);

– enhancing the competitiveness of retailers and Small and Medium Enterprises (SMEs);

– preparing retailers for the implementation of Goods and Services Tax (GST).

Such double-speak borders on lying and is a clear case of misleading the Parliament and hence the people it represents.

Pakatan Rakyat opposes the implementation of GST until the following conditions have been dealt with, namely:

1. Without addressing systemic corruption and cronyism, the Government has no moral right to impose any new tax whether it is GST or something else;

2. The immediate imperative of the next Government is not to tax the squeezed middle class and the poor more, but to grow their income and disposable income so to ensure dignified lives for them and also for them to have more cash in hand to contribute as consumers to drive the domestic economy. Taxing them will further erode their disposable income.

The Barisan Nasional Government must be reminded that 60 percent of the households live with a monthly income of less than RM3,000, which is why they qualify for Bantuan Rakyat 1Malaysia (BRIM). Imposing GST will tax this group more than what BRIM gives them.

The argument that several hundreds of items consumed by the poor would be exempted from GST does not hold water because as the implementation of BRIM shows that the squeezed middle and the poor together made up 60 percent of the population. They  are too big a group to escape, or, to be exempted from, the GST.

The Government must be sincere in its articulation of economic policies, in particular taxation policies. It is highly irresponsible to hide its intention to implement GST behind coded words.

Barisan Nasional should take the GST to the next general election and asks Malaysians whether they want a corrupt Malaysia with GST or Pakatan Rakyat’s offer of a clean Malaysia without GST.

Media Statement

2 October 2012

Nurul Izzah Anwar, MP for Lembah Pantai

Liew Chin Tong, MP for Bukit Bendera

Dr Dzulkefly Ahmad, MP for Kuala Selangor