PETALING JAYA: The Institute for Democracy and Economic Affairs (Ideas) has put a damper on calls for the abolition of the GST, saying it is “here to stay” whether people like it or not.
The think tank’s external relations manager, Azrul Mohd Khalib, said replacing the GST with a sales tax regime would yield only half the revenue.
He was commenting on former prime minister Mahathir Mohamad’s promise that the opposition coalition of which he is now the de facto leader would replace the GST with a sales tax system if it came to power.
Azrul noted that income from direct and indirect taxes currently constituted about RM180 billion – or more than 80% – of the government’s total revenue, of which RM38 billion came from the GST alone in 2016.
“The sales tax would have been able to raise only half of that amount,” he said. “So we would have to raise the revenue some other way to make up” for the shortfall.
“With current oil prices and continued support for 1.6 million civil servants, compounded by the fact that Malaysia is now a net importer of oil, abolishing the GST would just increase the deficit.”
He said this would result in decreased funding for essential services and delude some people into thinking that the country’s problems, such as the high cost of living, would be resolved.
“More importantly, it will distract from one of our main problems, which is government waste of public funds and overspending,” he added.
Azrul said the public, in having to pay GST, would be compelled to take an interest in how the government spends money. This would increase the demand for accountability and transparency, he added.
“That’s incredibly important, especially in these challenging times. We must not regress to the mindset which makes people feel that it’s not relevant to them how the government spends.
“GST has a direct impact on how the public perceives government performance.”
Azrul said the government, through its BR1M cash aid, had already channelled back revenue from the GST to 70% of all households in the country.
He said BR1M helped cushion the impact of the high cost of living but was at best a temporary measure.
“To avoid a future increase in GST, the government needs to rein in on its huge spending on emoluments, unnecessary expenditure and, most important of all, wastage,” he said. “The public needs to demand that this happen. Getting rid of GST will not solve the actual problems.” -FMT