We’re not ready for GST, says Anwar

Prime Minister Najib Tun Razak’s argument that Malaysia should implement the Goods and Services Tax (GST) because other counties already have is off the mark, said Opposition Leader Anwar Ibrahim.

He pointed out that the United Nations Conference on Trade and Development Report 2012 had revealed in its report that the GST was more regressive in developing and transition economies than in developed counties.

“The low- and middle-income earners will lose a higher percentage of their income to pay for the GST compared with high-income earners,” he told the Dewan Rakyat while opening the budget debate today.

“According to research by Wee Chong Hui (Wee Chong Hui, 2006, Fiscal Policy and Inequality in Malaysia, University Malaya Press, Kuala Lumpur) GST will contribute towards higher income inequality in Malaysia.”

Najib, in his 2014 Budget speech last Friday, had said 160 countries already implemented the GST and this proved to be the “best” and “most effective” taxation system.

But Anwar said such comparisons could not be made. Singapore, for example, needed the GST because of the limited income tax it received. Singapore’s introductory GST, at 3%, was also far lower than Malaysia’s 6%.

“Listing out countries such as Rwanda, Zimbabwe and Cambodia to justify GST in Malaysia is also completely unsuitable because those nations do not have a good income tax system in place and their production is low.

“So these countries should implement GST to sustain their government,” said Anwar.

He said this was why Pakatan believed GST must be reviewed first and implemented only when the rakyat’s income level was satisfactory, the income tax system revamped, and the country’s economy stable.

Najib’s subsidy deception

Anwar said Najib had also failed to mention that the government was cutting cooking oil subsidies by RM505 million through the Cooking Oil Stabilisation Scheme.

“While the people are still in shock over the price hike of sugar, why did the prime minister in his budget speech shy away from announcing a price increase of cooking oil, an amount almost the same as the sugar cut?” asked Anwar.

He added that the RM650 Bantuan Rakyat 1 Malaysia (BR1M) cash vouchers announced in the budget for households earning less than RM3,000 would not offset the twin subsidy slashes.

Anwar pointed out that RM7.29 billion in subsidies had been cut for 2014, as opposed to RM1.7 billion allocated for BR1M.

“The government will collect RM5.6 billion, which will still come out of the pockets of the BR1M recipients due to the subsidy cut, despite the increase in BR1M,” said Anwar.

Budget discrepancies

Anwar also highlighted how the budget had reduced allocations for rural development by up to RM555 million, while increasing the budget for the prime minister’s office by RM1.5 billion.

“It’s clear that the development of the lower income group continues to be sidelined, but the high cost of negotiators at the prime minister’s office are maintained and even increased,” said Anwar.

Meanwhile, money had also been splurged in duplicating agencies that were already in existence, he said.

The newly announced RM15 million Malaysian Green Foundation is similar to the Green Technology Corporation; the RM30 million Bumiputera Entrepreneurs Start-Up Scheme (Superb) is similar to Teraju; the RM50 million Malaysian Global Innovation and Creative Centre (MaGIC) is similar to the Malaysia Innovation Agency and the Malaysian Foundation for Innovation.

Anwar further estimated that the funds allocated for administration would increase by a further RM22 billion, or 10%, to RM240 billion.

He said this was because the Finance Ministry’s data, in its annual Economy Report, revealed that administrative cost increased by 13% every year since 2010.

“This means the country’s deficit level for 2014 will increase to RM59 million,” he said. -FMT