On GST refunds and the RM19.4 billion

By TK Chua

I am no expert in the goods and services tax (GST) but I think I know a little about public finance.

When the government faces an overall fiscal deficit year in and year out, it is logical for all money collected, including GST earmarked for refunds, to be treated as revenue and put into the consolidated fund. This would help portray a better fiscal position, at least in the immediate term.

Not putting the money earmarked for GST refunds into a trust account does not mean that the money was lost, pilfered or stolen. My take is that the government could have been buying time by spending the money first and thinking of the refunds later, when money could be allocated from the consolidated fund as the financial situation improved. I think speaking of the money as “lost”, “pilfered” or “stolen” is too strong a description of the actual situation.

The government spent the money first, thinking that GST refunds would only come later when traders submit their documentation. Technically, the RM19.4 billion mentioned by the finance minister can be challenged by the government for various reasons, depending on the “validity” and “completeness” of the documents.

Firstly, not all refunds are due at the same time. Some could be delayed due to doubtful claims or incomplete documentation.

Secondly and more importantly, not all refunds are justified or valid. If traders imposed GST not on “value adds” but on the whole input cost, are they entitled to refunds? They “passed” the GST on to the final consumers, so I don’t think they are entitled to refunds.

I think the RM19.4 billion being tossed about is “over collection” from the final consumers which the former government treated as normal revenue.

When final consumers suffered from price escalations higher than the 6% GST rate, it was an indication that the tax was passed on to them by the traders. Therefore, if anyone is entitled to refunds, I think it is the final consumers.

The Customs and Treasury must diligently scrutinise all claims for refunds by traders. Not all are valid or justified.

TK Chua is an FMT reader.

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