The GST, a broad-based consumption tax, is better for as a sustainable revenue source for the government. It is the right thing to do for the country, but the right thing is always hard to do in politics, notes the writer. - Facebook pic, October 16, 2024
Opinion/Analysis
The state of the nation: the case for GST, again – Zainul Ariffin
We need a sustainable broad-based revenue-generating infrastructure, otherwise the government will run out of money
Updated 4 days ago
16 October, 2024
8:00 AM MYT
THE 6% Goods and Services Tax (GST), the broad-based consumption tax implemented in 2015, was offered as sacrifice at the altar of political exigency during the general elections three years later. It paid off politically and in 2018 the GST was no more.
As many are of the opinion that it was the GST that contributed to the end of the Barisan Nasional’s six-decade rule, no one since then wanted to touch it even if they agreed that it was something the country needed.
The governments formed after two previous elections had to bend every which way but the GST’s direction to meet the nation’s financial needs. Since then the country has done flips, somersaults and contortions trying to fill the RM40 billion hole in the national budget. Even then, it was still lacking.
Hence, we had Petronas giving extra dividends and royalties, GLCs selling assets, higher borrowings, and a milder version of consumption tax, which is the ho-hum sales and services tax. There were also plans for luxury goods tax, online sales tax, inheritance tax, etc. But all of them are inferior to the much-maligned GST.
We are now in a situation where the rise in government’s revenue is slower than the cost of its services, and we will come to a point when the two will meet and soon after expenses will be higher than income. What this means is that the government may not be able to deliver all the services that it has been giving all these years.
This is the reality that the government has to deal with. Demand for its services keeps growing, and there is also a higher expectation among the citizenry of the quality of services sought. At some point this will no longer be tenable and government’s finances could be overwhelmed.
Everyone who knows a thing or two about consumption tax will agree it is the best form of taxation – you use, you pay. That is why over 95% of countries have it. We are a self-enforced outlier in the face of this economic reality.
The GST is a progressive tax regime to complement the current one where there is a disincentive to make more money – the more you earn, the more you will be taxed. The GST was also planned to result in lower income taxes, but its untimely demise could not see any of the tax rationalisation benefits be realised.
Isn’t it perhaps time for the Government to re-introduce the GST? It is by all accounts to be the most efficient, equitable and effective way to shore up government finances and allow it to meet an ever higher expectation of its services, as well as rising cost of operations, goods and services.
Prime minister Datuk Seri Anwar Ibrahim agreed on the effectiveness and efficiency of GST to expand government coffers, but said it will only be implemented when the minimum income threshold is at RM3,000-RM4,000. Currently, the minimum monthly wage in Malaysia is RM1,500.
It is a known fact that some members of the current administration were part of the campaign demonising the GST. Many of them had used it as one of their key campaign platforms against the government then. The internet, they say, does keep the receipts.
It was a political strategy that worked, but at what cost?
If indeed there was a need to address the issues facing the largest chunk of the population, a broad-based consumption tax would have been ideal in generating more revenue for the government.
In fact, for the lower income then, they got more from government cash assistance in the form Bantuan Rakyat 1 Malaysia (BR1M) than the GST they paid.
The GST also helped plug leakages from tax evasion. One of the by-products of the GST was the forced resurfacing of the underground economy; some estimated it to be then worth RM300 billion.
The removal of the GST is perhaps an example that not all that is promised by politicians is good, and that the needs of the country and its people, presumably, rises above all, especially political opportunism.
Incidentally, there were several countries where governments that introduced consumptions taxes were voted out – Japan and Australia, to name a couple – but the incoming governments did not revoke the taxes despite campaigning against them. Only in Malaysia did the then newly-elected Pakatan Harapan government carry out its promise.
The present government needs to be as transparent on the needs of the nation as it should be – that not all of the financial issues facing the nation can be blamed on corruption, or 1MDB.
The reality is costs continue to rise. We could be scraping the bottom of the barrel in the future to meet all our obligations if we do not have a sustainable, broad-based revenue-generating infrastructure.
The re-introduction of the Sales and Services Tax was clearly inadequate and, worse, did not deliver the lower prices for goods or services that was the raison d’etre for replacing the GST. We could actually be relatively poorer now than before.
Perhaps, this being the Budget season, the government could go beyond politicking, be brave, and do the right thing. Plan for a broader-based consumption tax regime. Yet the right thing is always hard to do. – October 16, 2024
The state of the nation: the case for GST, again – Zainul Ariffin
We need a sustainable broad-based revenue-generating infrastructure, otherwise the government will run out of money
Updated 4 days ago
16 October, 2024
8:00 AM MYT
THE 6% Goods and Services Tax (GST), the broad-based consumption tax implemented in 2015, was offered as sacrifice at the altar of political exigency during the general elections three years later. It paid off politically and in 2018 the GST was no more.
As many are of the opinion that it was the GST that contributed to the end of the Barisan Nasional’s six-decade rule, no one since then wanted to touch it even if they agreed that it was something the country needed.
The governments formed after two previous elections had to bend every which way but the GST’s direction to meet the nation’s financial needs. Since then the country has done flips, somersaults and contortions trying to fill the RM40 billion hole in the national budget. Even then, it was still lacking.
Hence, we had Petronas giving extra dividends and royalties, GLCs selling assets, higher borrowings, and a milder version of consumption tax, which is the ho-hum sales and services tax. There were also plans for luxury goods tax, online sales tax, inheritance tax, etc. But all of them are inferior to the much-maligned GST.
We are now in a situation where the rise in government’s revenue is slower than the cost of its services, and we will come to a point when the two will meet and soon after expenses will be higher than income. What this means is that the government may not be able to deliver all the services that it has been giving all these years.
This is the reality that the government has to deal with. Demand for its services keeps growing, and there is also a higher expectation among the citizenry of the quality of services sought. At some point this will no longer be tenable and government’s finances could be overwhelmed.
Everyone who knows a thing or two about consumption tax will agree it is the best form of taxation – you use, you pay. That is why over 95% of countries have it. We are a self-enforced outlier in the face of this economic reality.
The GST is a progressive tax regime to complement the current one where there is a disincentive to make more money – the more you earn, the more you will be taxed. The GST was also planned to result in lower income taxes, but its untimely demise could not see any of the tax rationalisation benefits be realised.
Isn’t it perhaps time for the Government to re-introduce the GST? It is by all accounts to be the most efficient, equitable and effective way to shore up government finances and allow it to meet an ever higher expectation of its services, as well as rising cost of operations, goods and services.
Prime minister Datuk Seri Anwar Ibrahim agreed on the effectiveness and efficiency of GST to expand government coffers, but said it will only be implemented when the minimum income threshold is at RM3,000-RM4,000. Currently, the minimum monthly wage in Malaysia is RM1,500.
It is a known fact that some members of the current administration were part of the campaign demonising the GST. Many of them had used it as one of their key campaign platforms against the government then. The internet, they say, does keep the receipts.
It was a political strategy that worked, but at what cost?
If indeed there was a need to address the issues facing the largest chunk of the population, a broad-based consumption tax would have been ideal in generating more revenue for the government.
In fact, for the lower income then, they got more from government cash assistance in the form Bantuan Rakyat 1 Malaysia (BR1M) than the GST they paid.
The GST also helped plug leakages from tax evasion. One of the by-products of the GST was the forced resurfacing of the underground economy; some estimated it to be then worth RM300 billion.
The removal of the GST is perhaps an example that not all that is promised by politicians is good, and that the needs of the country and its people, presumably, rises above all, especially political opportunism.
Incidentally, there were several countries where governments that introduced consumptions taxes were voted out – Japan and Australia, to name a couple – but the incoming governments did not revoke the taxes despite campaigning against them. Only in Malaysia did the then newly-elected Pakatan Harapan government carry out its promise.
The present government needs to be as transparent on the needs of the nation as it should be – that not all of the financial issues facing the nation can be blamed on corruption, or 1MDB.
The reality is costs continue to rise. We could be scraping the bottom of the barrel in the future to meet all our obligations if we do not have a sustainable, broad-based revenue-generating infrastructure.
The re-introduction of the Sales and Services Tax was clearly inadequate and, worse, did not deliver the lower prices for goods or services that was the raison d’etre for replacing the GST. We could actually be relatively poorer now than before.
Perhaps, this being the Budget season, the government could go beyond politicking, be brave, and do the right thing. Plan for a broader-based consumption tax regime. Yet the right thing is always hard to do. – October 16, 2024
Datuk Zainul Ariffin is the CEO of Big Boom Media which publishes Scoop.
***
kt comments:
Many Pakatan leaders demonised the GST as part of their election campaign in 2018. The lies they used make me wonder how the frigg they still have the "water-faces", or even the conscience to face their supporters, having now plunged the nation's finances into deep sh*t because of the lack of tax revenue
Bunch of hypocritical S-Wholes!!!
No comments:
Post a Comment