KUALA LUMPUR – January 16, 2017: Second Finance Minister Datuk Johari Abdul Ghani has rubbished claims by opposition leaders that abolishing the Goods and Services Tax (GST) will be good for the country.
Instead, he argued that reversing the GST will be very disruptive to business operations and the economy.
“Without the revenue from GST, the government’s fiscal deficit will increase and subsequently it will affect our international ratings, thus increasing our interest rate.
“The GST has helped the government reduce the shadow economy of the country and create a more level playing field for all businesses to strive,” he wrote to The Mole in response to the latest round of criticisms leveled at the taxation system.
Shadow economy, also known as black market or underground economy, refers to a clandestine market or transaction which has some aspects of illegality or is characterised by some form of non-compliant behavior with an institutional set of rules.
Johari also wrote that none of the 170 countries that have implemented the GST, also known as value added tax, has ever done a U-turn to change the system.
In October last year, Johari pointed out that any attempt to do away with or zero-rate the GST would cause the government to lose up to RM38 billion in revenue.
According to him, the bulk of the revenue was used to pay salaries, bonuses and emoluments for the over 1.6 million government staff.
Talk of abolishing the GST has often been harped by the opposition, with former prime minister and Pribumi Bersatu chairman Tun Dr. Mahathir Mohamad the latest to do so.
In his address at the party’s launch last Saturday, Mahathir insisted that the taxation system was burdensome for the people.
“It (GST) will be abolished gradually and replaced with a sales tax, according to the people’s will,” he said.
Mahathir, however, did not elaborate on what kind of consumption taxation system will replace the GST if the opposition wins the next general election.
According to figures from Bank Negara, the government’s revenue from the Sales and Services Tax in 2014, before the GST, was implemented, was RM17 billion.
This jumped sharply to RM35 billion in 2015 after the GST was implemented in April.