KUALA LUMPUR, Oct 10 ― DAP Senator Liew Chin Tong has urged Prime Minister Tan Sri Muhyiddin Yassin to pledge openly not to reintroduce the Goods and Services Tax (GST) amid talks that the levy could make a return as the government looks to increase revenue.
Liew claimed the country’s experience under the tax regime all pointed to unfavourable outcomes, noting the sharp dip in consumer spending in the five years the GST was in place.
Lower and middle income households were the worst hit since the tax bit into a large chunk of their wages compared to wealthy Malaysians, who paid a much lower rate in proportion to their income, the former deputy defence minister argued further.
Malaysia has a small tax base, with lower income households making up more than half the population. Only 16.5 per cent of Malaysians pay income tax.
“Since 2013, I have been arguing that GST is the wrong cure to deal with a small tax base,” Liew said in a statement.
“Why are so few Malaysians paying income tax?..Why then are so few Malaysians paying direct income tax? The answer is simple: they are too poor to pay income tax. Their income just does not qualify them to pay income tax.”
Official data extrapolated from welfare programmes showed up to 60 per cent of Malaysians are recipients of state handouts.
The Najib administration rolled out the levy in 2014 as part of its effort to reform the tax system and increase revenue, but faced public backlash.
His government then responded by putting cash directly into the pockets of low income earners under the now-defunct 1 Malaysia People’s Aid (BR1M) programme, but did little to placate public discontent over rising living cost, which they blamed on the GST.
Liew said the introduction of GST was akin to the government paying out BR1M/BSH using the right hand, but used “the left hand to collect back more as a proportion to their income from this particular group.”
“By now, Malaysian economists should understand that GST is regressive,” he said.
“The poor and low- and middle-income families pay more GST as a proportion of their income than their richer counterparts.”
Rumours about a return of the GST followed Prime Minister Tan Sri Muhyiddin Yassin’s repeated assertion that he would consider “all options” in a bid to revive the pandemic-hit economy.
But Liew reminded Muhyiddin that the GST became the political shorthand for his predecessor, Datuk Seri Najib Razak, who led Barisan Nasional to its first defeat in over six decades on the back of public anger over inflationary pressures.
“Najib followed some ill-advised neo-liberal ideas to cut budgetary outlays in 2015 and 2016 when the economy was hard-hit by the oil slump, exacerbating the sufferings and anger,” he said.
“And the GST was introduced in April 2015. Such was the economic cocktail that helped Najib’s defeat in 2018.”
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