GST revival redeems BN, but not Najib, say analysts

Analysts agree BN should have introduced the goods and services tax at a rate of 3% and then increase it gradually. (Bernama pic)

PETALING JAYA: Calls for the reintroduction of the goods and services tax (GST) are a redeeming factor for the previous Barisan Nasional (BN) government, according to analysts, as economists and manufacturers come out in support of the abolished tax regime.

However, the academics add that the same cannot be said for Najib Razak, who is standing trial on charges linked to 1MDB.

Universiti Malaya’s Awang Azman Pawi said he does not expect public support for Najib to grow because of the impact of the 1MDB case locally and internationally.

“Politically, this will improve BN’s image which was, prior to this, greatly affected by major issues such as 1MDB, Tabung Haji and so on. But support for Najib will not change much as he’s currently facing such a big case in court.

Awang Azman Pawi.

“The 1MDB scandal is covered by the media as one of the biggest financial scandals in the world with a money trail tracked by international investigators,” Azman told FMT.

He said Najib’s failure to pay attention to the sentiments of the people cost BN the elections, adding that one of the coalition’s mistakes was introducing GST at a high rate of 6% when the people did not understand the benefits of the tax in relation to the country’s development.

“What it should have done in the earlier stages was to introduce it at 3% and increase it later when the people better understood its importance.”

Universiti Teknologi Malaysia’s Azmi Hassan agreed with Azman, saying the 1MDB case will continue to bog Najib down while the calls to reimplement GST will benefit Umno.

Azmi Hassan .

Nevertheless, he expects Najib to use the issue as a political tool against PH, telling FMT that Najib still holds significant influence.

“No doubt Najib will use this issue to demonstrate how correct his GST policy was, and will reiterate that PH came into power through deceit and lies.

“But I still believe it will benefit Umno more compared to Najib himself.”

James Chin of the University of Tasmania’s Asia Institute told FMT that BN would benefit from the GST issue, saying the two have always been closely associated.

He also dismissed the notion that this was a “victory” for the former prime minister. “Najib has got bigger things to worry about,” he said in reference to his ongoing 1MDB trial.

James Chin.

“In any case, Najib brought in GST partly because he was spending so much money that the treasury was empty. He used off-the-books borrowing plus 1MDB interest payments.”

Earlier this week, the Malaysian Institute of Economic Research (MIER) had urged Putrajaya to reintroduce GST in the 2020 Budget at a lower rate of 3%, saying it had kept the government afloat when crude oil prices declined to below US$36 per barrel in 2015.

Prime Minister Dr Mahathir Mohamad said the government could bring back GST “if that is what the people want”, while Finance Minister Lim Guan Eng said Putrajaya needs to receive a clear mandate from the people before making any move to revert to the tax regime.

Chin had dismissed Mahathir’s comments, however, saying he was convinced Mahathir was joking when he said that.

Economists have come out in support of the think tank’s suggestion, saying the tax regime is better than the sales and service tax (SST) and easier for businesses to implement and for the government to administer.

Former deputy finance minister Ahmad Maslan also welcomed the proposal, saying it could help the government reduce its reliance on oil revenue and foreign borrowings.