7% GST plan 'ridiculous' in low-income Malaysia

The debate on the government's plan to introduce Goods and Services Tax (GST) continues, with PAS Research Centre director Dzulkefly Ahmad describing the 7 percent rate as hinted by minister in the Prime Minister’s Department Idris Jala as ridiculous.

“Maybe Najib has awakened to the fact the Federal government’s debt has ballooned to almost 55 percent of Gross Domestic Product (GDP) because of him,” Dzulkefly told Harakahdaily.

Idris recently told a forum that at 7 per cent GST, the government could earn some RM27 billion. The rate was almost doubled from the 4 percent when GST was first mooted.

Dzulkefly, the former Kuala Selangor member of parliament, said even Singapore, which has three times Malaysia’s earnings per capita, had introduced GST at the rate of 3 percent due to the exorbitant cost to get the tax system implemented.

"(It will add) pressure to cost of goods and services namely inflation, which could not be avoided due to cost of starting the GST,” he added.

As a result of the GST, Dzulkefly reminded that Singapore faced 3 percent inflation rise for three subsequent years.

Dzulkefly (left) said Pakatan Rakyat planned to implement GST only when the people’s income reach a reasonable level, unlike at present where some 60 percent earn less than RM3,000 a month.

But he disagreed with the suggestion that consumers would have to ultimately bear a total of 28 percent tax for goods and services, having absorbed the 7 percent GST imposed on three higher levels – production, wholesale and retail.

“GST uses the Value-Added Tax (VAT) system like in United Kingdom,” he added.

While admitting GST could be a more efficient taxing system, Dzulkefly insisted that it must not be implemented unless wastages and leakages within the government could be halted. -HD