GST: Debunking Ahmad Maslan’s 30 percent black economy nonsense

Media statement by DAP National Political Education Director and MP for Kluang Liew Chin Tong on 26th February 2015

Is Deputy Finance Minister Ahmad Maslan making nonsensical statements because the efforts to push pro-GST propaganda to the public have been stalled?

Yesterday, Bernama reported Ahmad Maslan as saying that GST would help reduce the black economy rate to 10 per cent from 30 per cent at present.

This is one of the most absurd statements the bungling Deputy Minister has ever made, caused by gross lack of understanding.

The report quoted the Deputy Minister:

“This is one of the merits of the GST and I don’t understand why the opposition continues to advocate the Sales and Services Tax. This means they are protecting black economy, shielding tax evaders and defaulters,” he told reporters after briefing police personnel on the GST, the 2015 Budget and current issues at the Johor Police Contingent Headquarters here yesterday.

Ahmad said that according to the World Bank, black economy (untraceable, and hence untaxable, business dealings) amounted to 30 per cent of the gross domestic product.

Ahmad Maslan either does not understand what the World Bank was talking about when it discussed the informal or shadow economy or he has never read about it at all.

“Black economy” is something else that means illegal businesses and transactions. If 30 percent of what is transacted in Malaysia are illegal, as alleged by Ahmad Maslan, then something is entirely rotten with the Malaysian legal system. How could the authorities sit back and do nothing if all these transactions are illegal?

Please. It’s the informal economy, not “black economy”

What the World Bank meant in its Malaysia Economic Monitor Report is that substantial numbers of Malaysian households breadwinners are working in the “informal sector” – this could refer to hawkers, small traders, casual workers and other types of work which are not in the formal (i.e not taxable) sector.

This could mean your makcik who sells nasi lemak by the roadside or the father of four who work as a part-time shopkeeper.

Many Malaysians are in the informal sector due to the lack of access to capital or lack of opportunities or lack of education and skill attainment. Others resort to it to make ends meet because their main jobs do not pay enough, particularly for blue-collar or semi-skilled workers.

When wages are low, employees are then forced to be entrepreneurial or setting up a burger stall. These endeavours do not earn them much, on top of that they have to face rising costs and compete with bigger players with capital.

Indeed, the informal sector will be one of the worst hit groups by the implementation of GST, because now they will be subject to taxes and rising costs that will cut into their already meagre profits.

What is wrong with defending the informal economy?

I have long complained that we do not need a propagandist at the Finance Ministry, certainly the grave error in the Deputy Minister’s statement shows that he is nothing more than a propagandist and lacks economic understanding.

This is worrisome for the nation. Now more than ever, we need leaders who understand economics and can propose viable solutions, or are at least able to read the various economic reports properly.

Ahmad Maslan should apologise to the Opposition and those who disagree with the implementation of GST for maliciously suggesting that they protect the black economy, when all we are trying to do is to demand for a better deal for all Malaysians in terms of economic policy.

Liew Chin Tong