Tuesday, December 01, 2009

GST: First Blood

I issued my first press statement opposing the proposed Goods and Services Tax today. This will probably be the first of the many to come, and should we not be successful in pressing the Government to withdraw the bill, then, it will be a nationwide campaign all the way to the next General Elections! Prior to the recent announcements, I've already debated this issue in Parliament

Second Finance Minister, Datuk Seri Ahmad Husni Hanazlah has revealed yesterday that he expects the new law on the GST to be passed in March next year, and will be fully implemented by January 2012. He had earlier mentioned that he expects the GST rate to be set at 4%.

We would like to point out that while there are some theoretically sound reasons for the implementation of a GST system in Malaysia, it is totally inappropriate for the Government to impose GST any time in the near future as at this point of time, it will only serve as a heavy burden to the rakyat at large.

We would like to outline here 3 pre-conditions before a GST system can be imposed in Malaysia:

1.Malaysia must first achieve the “high income” status bandied about by the Prime Minister before imposing GST.

Today, out of a population of 27 million, there are in effect only 1.8 million tax-payers who pays any income tax, or only 6.7% of the population. Even if we were to take into account only the 12 million working population, it is only 15% of them who have pay any taxes. The 85% who don't pay are those who actually don't qualify to pay any taxes because their income is too low. However, with the implementation of GST, every single one of them whether they are earning RM500 a month or RM1,500 a month or even RM2,500 a month, who don't current pay any taxes, will be forced to bear the heavy burden of the GST.

Therefore, it is only fair that the income levels of the average Malaysian is raised to a level where the overwhelming majority of working Malaysians are already taxable before the switch is made to a GST or indirect taxation system.

2.The Government must get rid of all “hidden taxes” in our daily goods and services first before any new tax on such services are imposed

The rakyat are already heavily burdened by “hidden taxes” payable to Barisan Nasional (BN) crony concession companies such as the toll on the highways, or the huge subsidies to the Independent Power Producers (IPPs) as well as the high water tariffs to the privatised water concessionaires due to the lob-sided contracts signed by the Government with these parties. These “hidden taxes” are paid daily to these crony companies which amounts to billions of ringgit a year enabling them to make astronomical profits annually.

Hence until the BN Government demonstrates the political will to restructure these concessions to ease the sufferings of the man on the street, imposing the GST will only rub salt to the would of the people for we will then have to not only pay for high toll, electricity and water rates, we will have to pay GST on top of them!

The BN Government must demonstrate that it does indeed believe in its slogan of “people first”, and not in reality, “crony concessionaires first”.

3.The Government must exhaust all avenues of raising funds and ensure that maximum value is extracted from all Government assets before any attempt to raise additional taxes from the rakyat.

For example:
  1. The Government has refused to openly auction the 30,000 to 60,000 approved permits (APs) issued annually to private connected companies to import foreign vehicles which can in itself raise up to RM1.8 billion per annum. In contrast, the Second Finance Minister claimed that the new GST will only raise approximately RM1 billion per annum.

  2. The Government has refused to conduct open tenders for its privatisation exercises to ensure the best quality at the lowest cost such as the building of the new mega-Matrade Convention Centre for RM628 million.

  3. At the same time, it has also refused to openly auction its land for sale but has instead awarded a 62.5 acres piece of prime land at a valuation of RM197 million to a private company, when the independent property consultants have valued it between RM970 million to RM1.5 billion!
With so many other means of raising additional funds and mechanisms to reduce cost for the Government to carry out its programmes, there is absolutely no necessity for the Government to be imposing the GST at this stage, especially in the light of the fact that 85% of the working population will be heavily burdened because their income levels are still low.

We call upon the Prime Minister to fulfil the above conditions first, including his own promise to achieve a “high income” society, before even contemplating to reform the tax system with the implementation of the GST.
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