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Mahathir outlines how GST, handouts can be dropped

 | October 19, 2017

What is needed are sound economic programmes and a stop to the abuse of government funds to gain personal popularity.

Mahathir-GSTKUALA LUMPUR: The goods and services tax (GST) can be abolished without affecting the revenue of the government and without creating a burden for the people, Dr Mahathir Mohamad says.

In his latest blog post, the former prime minister says the reason Prime Minister Najib Razak has imposed the GST is because the government has mismanaged government funds simply to gain popularity for himself.

According to him, the government of today should be collecting more than that collected in the 80s and 90s.

If the government were to be prudent in the management of government funds, there should be no shortages, and new taxes avoided, he adds. BR1M, for instance, should be converted to unemployment benefit for the hardcore poor.

The chairman of PPBM gives some examples of Najib’s use of money to win popularity.

Najib, he says, has set up numerous extra-governmental organisations such as Pemandu where huge salaries, well above the government’s pay scale, are paid to the heads and the staff.

“New posts are also created in and outside the government which do not conform to the government’s salary scale. How much they are paid is not known.”

He says one of the highest contributors to the shortage of government funds is the loans taken by Najib.

“There is a ceiling to the loans that the government can raise. But Najib resorted to borrowing by a government company – the 1MDB, which is not limited by government rules.”

As 1MDB is 100% owned by the government, if 1MDB does not service or repay the loan, the government will have to do it.

“And so when 1MDB lost money, government had to take over the company and pay the interest and the loan.

“It is the same with the RM55 billion for the East Coast Railway (Link). Altogether it is estimated that Najib has borrowed almost RM200 billion. Some of the loans carry interest rates of 6%.

“Assuming the average interest rate is 3%, the government will have to pay RM6 billion yearly in interest alone. Paying the principal will cost more billions. It may take two generations to settle all the loans.”

Also, the government spends RM7 billion or more on annual BR1M payments, and on handouts of RM300 to fishermen, “RM800 for party members who are chairman of JKKK (village development committees), thousands for Hajj Pilgrims, pensions for retirees not eligible for pension, etc”.

In addition, the salary bill for civil servants has been on the rise.

Saying the various handouts and allowances to various groups should be revised or stopped, he offers some suggestions on how the money can be managed better with sound economic programmes.

For instance, he suggests, BR1M should be converted to unemployment benefit for the hardcore poor.

“Most of the present recipients can afford to do without BR1M. The actual amount of support for hard core poor should be raised and paid every month, not once a year.”

The 1MDB money can be recovered “as we know where the money is”.

The RM300 handout to fishermen can be stopped if there were to be better policing of our waters so that foreign fishermen do not intrude. This will result in better catches for local fishermen.

“All these people who financially benefit from Najib’s largesse may be happy. But actually, the increases in their income benefits them very little. This is because the increases of their pay invariably causes a rise in the cost of living. In other words, the increase in pay does not increase the purchasing power.

“It is not how much one is paid that is important. What really matters is one’s purchasing power. When cost of goods and services increases the extra income that one gets is quite meaningless.

“We all know of countries where the pay is in millions but they are all poor because of the depreciation in purchasing power of their money. A country can fail and become bankrupt where workers are paid thousands or even millions every month.”

Noting that revenue is coming in, he claims the government of today should be collecting more than that collected in the 80s and 90s. He says the government “must receive much more money by way of petroleum profits and taxes and corporate taxes even today”.

“But the government claims it had to introduce the GST because it is short of funds.

“The truth is that Najib’s regime is abusing government revenue by spending huge sums to get popular support for Najib.”

Dr Mahathir adds: “If the government wants to reduce the huge deficits every year, what is needed is to get rid of the belief that money can buy popularity. It cannot. It has only made the government and Najib more unpopular.

 


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