Call for a candid review of GST’s first quarter

The Goods and Services Tax (GST) was implemented on 1st April 2015 and the first quarter of its implementation is about to end.

I call on the Government to launch a whole-of-government review of the first quarter of the implementation of GST in a candid and sincere manner to deal with its various problems and issues.

Special Cabinet Committee on Cost of Living, chaired by Deputy Prime Minister Tan Sri Muhyiddin Yassin, talked about some sort of review to be initiated. Bank Negara also mentioned a study to be conducted.

But there is yet a whole-of-government approach to both the implementation of GST and the review process. This is urgent, given that the wider economic conditions are worsening, especially with ringgit fallen to its 9-year low.

I call on Prime Minister and Finance Minister Datuk Seri Najib Razak to take it upon himself to launch a whole-of-government review of the GST’s first quarter to give weigh to the matter before the economy goes south with the double whammy of coping with a very messy GST system and rapidly falling ringgit.

Here are some of the issues:

First, the Government must be frank about the negative impact of GST on domestic consumption as Malaysians are paying more taxes via GST than before.

I spoke in Parliament on 15th June when Second Finance Minister Datuk Seri Husni Hanadzlah was replying on the 11th Malaysia Plan that there is a need for the Government to take into consideration the global headwinds Malaysia has to grapple with and tweak the GST implementation at the least.

Malaysia’s exports are not growing due to the slowdown in China, Europe and Japan while recovery in the United States is still not strong. Regardless of how the ringgit falls it will not help Malaysia’s export market too much.

In such context, the Malaysian economy is standing on one leg, that of domestic consumption, which the GST threatens to eclipe.

I told Husni that the Government should be prepared to consider suspending the GST or reducing the rate for a while.

The other major concern is compliance costs of the SMEs which was highlighted by the World Bank Malaysia Economic Monitor Report published on 16th June 2015. The Report noted the messy list of exemptions as well as too low a threshold (RM500,000 annual turnover) resulted in very high complaince costs for the SMEs and small businesses.

I also spoke in Parliament on 11th June 2015 calling on the Ministry of Domestic Trade and Consumer Affairs to halt its use of “Price Control And Anti-Profiteering (Mechanism To Determine Unreasonably High Profit [Net Profit Margin] Regulations 2014)” Federal Government Gazette, which was published on 26th December 2014.

The Government is trying to regulate the price of individual product item. Margin of a product must not exceed the price of 2nd January 2015. This is most ridiculous as most businesses manage their stocks based on categories. Further, margin is calculated by businesses as a percentage, not an absolute figure.

Such regulations would just add to compliance costs and eventually kill the entire retail sector.

A whole-of-government approach to review the GST’s first quarter is urgently needed before the economy is tanked by GST and falling ringgit.

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