Commentary Politics

Venting anger on rising cost of living

gst

TheMole
Written by TheMole

By Salahuddin Hisham

YANG Berhormat Nurul Izzah Anwar was caught saying – if Pakatan Harapan wins in the general election, they will continue with the Good and Service Tax (GST).

It is a U-turn from Tun Dr Mahathir Mohamad’s and Pakatan Harapan’s war cry for the abolition of GST. Nurul Izzah immediately tried to wiggle her way out, but was still caught not mentioning abolition of GST.

GST was largely blamed for the rising cost of living and the underlying reason behind the anger against the government. Even yours truly can feel the pinch of paying RM10 for what used to be RM5 nasi campur. More so, the same rice and dish combination used to cost only RM3 a few years ago.

The anger and frustration is well understood but the blame has to be made responsibly.

One cannot over-simply the issue of rising prices as done by one populist preacher who accused the government for being insensitive.

Consumers with sufficient understanding will appreciate it is not so simple.

Salahuddin Hisham was involved in various financial markets but has since, turned political and online.

National Transformation

They may still be angry but they know it is not the fault of a single party and involves a complex myriad of factors.

When former Minister in charge of PEMANDU, Datuk Idris Jala made a shocking statement that the government could go bankrupt by 2019, Malaysians got angry. They thought it was merely an excuse to pursue a policy to reduce subsidy. They refused to accept the findings that the trend towards emulating Greece was inevitable.

The government persisted and plugging of leakages began, including cost cutting measures being put in place. For a fact, the Pakatan Rakyat manifesto for 2009 advocated the same.

It is a good thing that the transformation plan was already on the way. When the oil revenue reduced by RM36 billion a year, there was a fall back plan ready and in place. In the face of such economic diversity, all including the government will have to take a hit from the austerity drive.

It is inevitable.

The government has to raise more taxes or there will be more massive cutbacks of social programs. However, raising taxes would invoke the anger of tax payers. It is not in-sync with a long-term policy to reduce tax rates.

The suggestion to raise corporate tax is only a populist view. It is bad for business and investment will flow out. Improving the tax collection system needs time and not solve the immediate problem. Pursuing tax evaders require time, and cost to investigate and litigate.

The best option on hand is to restructure the tax system and make it fair.

Despite the poor and fakir getting financial assistance, they still pay annual zakat fitrah. However, only 15% of Malaysians pay tax. More than 65% tax collected is from Government-linked companies – the bulk is Petronas.

GST serves the purpose as it is based on consumption and not income. It is acknowledged by tax experts as the fairest tax system and curbed leakages through a shadow economy, which is estimated by economists at 30% Malaysian Gross Domestic Product.

More than 170 countries have adopted GST or Value Added Tax (VAT). It may sound like a broken CD repeating itself but our GST system is rakyat sensitive. It is not applied to 2,000 items and 6% is still the lowest in the world.

Poor enforcement

The reasonable consumers will understand the reason and leeway in the GST implementation. However, the angry ones will blame poor enforcement by government. That is acceptable.

The enforcement system is in place but its execution, one can safely say, is wanting. It would be good to remember this is not the purview of policy makers or politicians but that of the civil servants.

The problem we face is that most critics opt to take a populist view, at least with the civil servants. Hence, they do not blame the civil servants and their lack of seriousness in enforcing the rules and regulations. They close their eye on a major problem with enforcement, that is corruption, which is rampant among civil servants.

These populist preachers need be reminded that Malaysia has no policy to legalise corruption. Our courts have sent Chief Ministers and hot shot corporate leaders to jail for receiving kickbacks.

If the angry consumers wish to be blame their so-called predicament on anything or anyone, it would be the free market economy practised by Malaysia. Free market means the government has no hand in setting prices of goods and services in the market other than control items.

Anti-trust law or anti-monopoly policies can be put in place, but the same problem of enforcement and corrupt officials will come in the way.

Consumers and Civil Servants

However, consumers in the free market have the purchasing power and bargain to teach profiteering retailers and wholesalers. But when retailers exorbitantly raise prices and they still buy, the retailers have the bargaining power in an inelastic demand market.

The angry consumer will blame the government but they have to blame themselves and the preacher too.

Past attempts to boycott chicken, and various branded products could not last beyond social media campaign. Parents simply are not willing to make short-term sacrifice for a cause.

 “Without chicken, what will my children eat?” complained parents.

The public ridiculed good cost-saving advice to pack their lunch to work. They refused to accept suggestions to grow hydroponic vegetables to help reduce the cost of food.

Consumers are partly to be blamed for the problem of demand pull inflation. During fasting months, Muslims should eat less but consumption is not moderated. It has become a festival of indulgence and abundance. Naturally prices increase, but profiteering by Chinese retailers is not to be singly blamed.

GST could have helped to address cost push inflation. There is basis for the claim buy former Deputy Minister of Finance Datuk Ahmad Maslan that GST could bring prices down with the deduction of the invisible Sales and Services Tax (SST).

Unfortunately it did not happen. Retailers did not deduct SST but added on GST. On top of that they charged additional 6% for the rebate they would receive from the government later.

The Customs Department failed to get the U Custom system on time and it has yet to be delivered till today.

They did not educate the small businessmen nor properly taught the public about GST. It seems a few Customs top officials at the state level are known to not thoroughly understand the GST system after two years of preparation.

If that is the fault of government, then it is.

But it is not because they intentionally are being cruel to the people. The civil servants simply failed to implement.

Politicians are not allowed to interfere in implementation. And politicians can neither dismiss incompetent public officials nor transfer corrupt enforcement directors who have been around for decades.

The policy of the current government is a repeat of the past policies of Tun Abdul Razak to be people-centric and focused on the poor and needy. Past pro-business policies had actually built-in high cost in the system.

Shadow Economy, Corruption and Privatisation

Rising cost is also the inevitable impact from past policies that have built-in rising cost into the system. It is the mechanism to enrich proxies, cronies and certain family members.

And, past administration closed one eye to corruption and shadow economy. Not only was it not addressed, the indifference allowed it to flourish.

Corruption added cost to good and services.

Shadow economy denies government tax. It creates unfair competition and monopoly, and adds to the ills of society. Without a level playing field from fair competition, monopolies corner markets and increase prices at will. Backed by crooked politicians, monopolies are believed to be behind the critics and saboteurs of GST

The past administration created monopolies through privatization. Though it is supposed to bring about efficiency in service, it ended up costing consumers more as capital expenditure are passed on to consumers.

The old mini bus fares were 50 sen but privatization immediately resulted in fare increase to at least RM1. The reason was the massive purchase of new buses.

Malaysian businessmen are lazy to introduce innovation in their business process, introduce automation and improve operation efficiency to keep cost low. They conveniently transfer cost to willing consumers.

Operators of privatised government services raised capital to finance massive capital expenditure, which are generally hidden corruption and kickbacks. That is in-built cost consumers have to bear till today.

The privatization that really hit consumers were the Independent Power Producers and highways. It came with automatic increase as kicker to attract banks to finance. Energy and transportation are major contributors to business cost and widest impact on cost throughout the economy.

Even all these could be moderated if Petronas was not abused to be the unofficial banks for the bailout of failed, ego-centric recklessly-planned, and corruption-laden projects. Opposition to those past abuses was weak.

Consumers have every right to be angry and continue to be angry. However, the blame falls on all parties, including consumers and those who chose to remain silent in the past. The lackadaisical attitude only contributes to the present predicament.

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TheMole

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