Friday, November 27, 2009

Deputy Finance Minister was Clueless on GST

I raised my concerns on the controversial Goods & Services Tax (GST) in my committee stage debate on the Ministry of Finance, you can hear it here. The key gist of my argument was that while GST is in theory, more effective and efficient, it has to be noted that in Malaysia only 6.7% of its 27 million population pay any income taxes, or 15% of its working population. This means that any introduction of GST today would mean a substantial burden on 85% of the working population who current do not pay a single cent of tax. They are not pay tax not because they are evading, but because their income is below taxable levels.

Hence my argument was that the GST should be implemented only after a sizeable majority of the working population are able to increase their income to taxable levels. Then, it may be appropriate to switch from a direct taxation mechanism to an indirect one like GST. In essence, until the Prime Minister's stated goal of becoming a "high income" society is achieved, the Government must not implement the GST.

The Minister replied to my concerns very briefly. He said he agreed with my comments, but the Government at this stage is only studying the matter and do not have any intentions at all to implement a GST any time soon. This was on the 18th November 2009 (Wed).
Dato’ Dr. Awang Adek Hussin: [...] Saya ingin menyebut beberapa perkara lain. Salah satunya GST di mana Yang Berhormat Petaling Jaya Utara pun ada enyebutnya. Dia kata sokong dari dasarnya bagus cuma masanya tidak ready lagi. Pertamanya saya ingin menyatakan di sini bahawa kerajaan tidak berhasrat melaksanakan GST dalam masa yang terdekat ini tidak ada. Sekarang ini pada peringkat kajian, mengkaji, memahami dan mencari penyelesaian kepada masalah-masalah yang mungkin timbul.

Apabila kita sudah dapat ke tahap di mana kita yakin bahawa semua ini sudah dibereskan, barulah pengumuman akan dibuat. Akan tetapi, buat masa ini tidak ada lagi sebab ada juga orang dan media pun bertanya adakah kita hendak laksanakan tahun depan kerana perbincangan- perbincangan yang sering disuarakan di dalam Dewan yang mulia? Akan tetapi bagi pihak kerajaan, saya boleh katakan bahawa kita tidak ada perancangan untuk melaksanakan dalam masa yang terdekat.

[...]Cuma, ada seolah-olah tadi di mana saya tidak mahu ada tanggapan bahawa Malaysia tidak ready, negara-negara lain ready melaksanakan kerana mereka ready. Mereka sudah bersedia tetapi tidak bagi Malaysia. Saya cuma mahu katakan, negara-negara yang telah melaksanakan termasuklah negara yang berpendapatan lebih rendah daripada Malaysia dan sudah melaksanakan. Contohnya, Sudan, Indonesia, Thailand, dan Vietnam sudah pun memperkenalkan GST ini. Maknanya, kalau sesuatu yang tidaklah di luar kemampuan kita sekiranya kita sudah bersedia. Akan tetapi, pada peringkat ini kita sedang mengkaji.
And then, guess what, in less than a week, the Prime Minister and Finance Minister, Dato' Seri Najib Abdul Razak announced that the Government will table the GST bill for first reading in the current session of parliament!! The 2nd Finance Minister, Datuk Seri Ahmad Husni Hanadzlah even indicated yesterday, the the GST rate will likely be at 4%!

Obviously, the Deputy Finance Minister, Dr Awang Adek was complete out of the loop and clueless about the GST and should not have been allowed to answer the question! This shows how important the Government treats the Parliament as its highest legislative body.
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