Review, don’t abolish GST

The 6% goods and services tax will be zero-rated starting June 1 and replaced with the sales and services tax.

The unexpected has become a reality for Malaysia: Barisan Nasional (BN), which enjoyed the uninterrupted power to rule since independence, has shockingly lost its mandate to a loosely formed coalition of political parties called Pakatan Harapan (PH).

While the majority of the population rejoices over this victory, the most welcome part of it was the smooth transition of power. Well done to former prime minister Najib Razak and his team for acting with the utmost respect and dignity in facilitating this transition. Once again, we have demonstrated to the world that Malaysians are a mature people who exemplarily uphold democratic values.

Various factors were blamed for BN’s downfall, ranging from alleged financial scandals, wide-scale corruption, abuse of power, and cost of living issues.

As for the spiralling cost of living, people were made to believe that this was caused solely by the implementation of the goods and services tax (GST), unfairly ignoring the fact that another major contributing factor was the sharp decline in the value of our currency, which made our imports more expensive.

PH amplified the GST issue to paint an inaccurate picture of the former government when the fact of the matter is that the GST has been proven to be a transparent, broad-based consumption tax which has been implemented by 160 countries across the world. Surely all these countries cannot be wrong. Although hugely unpopular, many economists consider the GST the most efficient way of widening Malaysia’s tax base.

The prime minister recently announced that the GST would be zero-rated beginning June 1, contrary to the media statement made just a few days earlier by Zeti Akhtar Aziz that removing the GST might take more than 100 days. While consumers rejoice in the false hope that prices will come down, will there be enough time for businesses to adjust?

Irrespective of manifesto promise, I would recommend that the government maintain the GST but reassess its implementation mechanism. For instance, the tax percentage can be reduced for essential products and increased for luxury items.

We could follow the model used by the Indian government, which categorises items in five major groups: 0%, 5%, 12%, 18%, and 28%. Why should the rich enjoy the same tax benefits as the masses? Revenue generated from the collection of GST should be equally distributed to support the social well-being of the lower income population.

We should acknowledge the efforts made by the previous government to painstakingly introduce this tax system. Businesses have spent thousands, if not millions, implementing it, and consumers are already used to it. So why abolish it?

I am not an economist, but surely we cannot depend on revenue from petrol and income tax alone. The world crude oil price is at a high now, but it could crash overnight. What will our source of revenue be if the world oil price eventually does crash?

As for consumers, let’s relook, reconsider and review our own consumption patterns to ensure that we minimise leakage while stretching every ringgit to maximise its value. Let’s seize every opportunity to make our world a better place.

Darshan Singh is an FMT reader.

The views expressed are those of the author and do not necessarily reflect those of FMT.