KUALA LUMPUR — May 7, 2018: The abolition of the Goods and Services Tax (GST) will leave the government with three options that could hurt the country’s economy.
Permodalan Nasional Berhad (PNB) Chairman Tan Sri Abdul Wahid Omar has cited the choices as raising income tax or introducing a new tax such as capital gains tax, increasing the country’s fiscal deficit to five per cent or reducing spending, including development expenditure.
This means scrapping or suspending development projects that have been approved.
Wahid described the three options are very dangerous since they can affect the capital market and result in the ratings of the country’s international debt credit being downgraded to BBB from the A3/A. This will certainly increase borrowing costs and harm the economy.
According to Wahid, the original purpose of the GST was to widen the tax base since Malaysia has only two million income taxpayers then, a small number against a population of 30 million.
“GST is a consumption or indirect tax where those who spend more are among the people who earn more,” he said.
The introduction of the GST was also in line with the fiscal consolidation measures targeting a balanced budget in the medium term.
“With the increase in government revenues, we have not only reduced our fiscal deficit but also implemented many of the previously delayed development projects such as highways, roads, bridges, schools, hospitals, rural clinics, and others.
“This includes the construction of the Pan Borneo Highway which is rapid progressing and the project is expected to be completed by 2022,” he said.
Wahid described the proposal to abolish the GST and revert to the old tax system — Sales and Service Tax (SST) – as a step backward and could hurt the economy.
This is because the GST collection in 2017 was RM42 billion and is expected to increase to RM44 billion this year compared to the SST collection of only RM17 billion in 2014.
Malaysia’s GST of six per cent is the lowest in Asean and among the lowest among the 160 countries that adopt the tax regime.
Urging Malaysians to accept the election results on Wednesday with an open heart and unite to develop the country, he said: “Do not allow political views to divide or isolate families. Silaturrahim (brotherhood or the bond of friendship) needs to be maintained.” — Bernama