While Sunway University economics professor Yeah Kim Leng said that reintroducing the GST at a rate of 6% could raise sufficient funds for the purpose, others advocate financial transaction taxes and even debt to fulfil the need.
Yeah said the reintroduction of the GST could help to raise revenues for the government that could go towards strengthening public healthcare.
He pointed out that the Covid-19 pandemic highlighted the importance of having an adequately funded public healthcare system.
Yeah said that assuming a GST rate of 6%, the additional amount that could be raised would be an estimated 1.5% to 1.7% of gross domestic product (GDP), which could provide for better healthcare, helping to strengthen the country’s preparedness for future health crises and natural disasters.
“Earmarking the additional revenue or some portion of it for healthcare will help to reduce resistance towards the GST,” he told FMT Business.
Increasing spending efficiency, reducing wastage and leakages as well as enhancing government service delivery are equally important for the GST to gain acceptance, he added.
Yeah was responding to questions on whether or not the government should reintroduce the GST to bankroll the country’s under-funded healthcare system.
Currently, spending on public healthcare stands at 2.6% of the GDP, below the average 4% of GDP spent by middle-income countries or the World Health Organization’s recommended 5% to 6% of GDP.
Citizens’ Health Initiative policy analyst Chan Chee Khoon said financial transaction taxes such as Tobin-type taxes were a better option.
Such taxes, he said, were more progressive and better for risk-pooling and funding healthcare as well as other social entitlements.
He said Tobin’s recommended tax rate of 0.5% on currency or stock trades would yield about RM5 billion annually based on 2021 daily trading values.
The People’s Health Forum convener Michael Jeyakumar Devaraj said the GST was a regressive tax because it would take up a larger percentage of income from low-income groups than from high-income groups and this puts a strain on the general public and the poor.
Instead, he said, the government could introduce “debt monetisation”, which involved the sale of government bonds to Bank Negara Malaysia at a low-interest rate of 0.1% instead of the 4.3% paid to private investors.
“We could raise RM50 billion via debt monetisation in 2023 in four bond sales of RM12.5 billion each, and monitor the ringgit exchange rate closely. Then, we adjust accordingly,” he told FMT Business.
This would provide the government with extra funds for social protection, which included healthcare, without increasing the debt servicing burden, he added.