by e.s. shankar

SAY NO TO RE-INTRODUCING GST!

You are not a drop in the ocean; You are the entire ocean in a drop! Rumi (1207-1273).

The 6% Goods and Services Tax (GST) law came into force on 1st April 2015, mooted by then Prime Minister and Finance Minister Najib Tun Razak and his UMNO/BN government. It was abolished in July 2018 by the new Pakatan Harapan government. GST was a disaster of biblical proportions. A dismal failure. Why? THE PEOPLE were not well-prepared for it in advance and many did not understand the concept or the confusing rules – input tax, output tax, standard rate, zero rate, exempt rate etc. The backbone of the economy i.e. Small and Medium Enterprises (SME), could not come to terms with online filing or afford the administrative and compliance costs.

Ultimately, it failed for three main reasons:

1. Malaysia’s global economic status, i.e. developing nation, was not at a stage where it was ready for GST which painfully burdened mostly the middle and lower income groups.

2. Mainly the government and its Ministers but also the civil service, did not monitor or control prices. Cost of just about everything skyrocketed. Why? Many unscrupulous businesses indulged in profiteering even though they were entitled to GST refunds on their cost of goods and services. Many did claim them, especially manufacturers and wholesalers. They then dishonestly blamed the government for soaring prices and inflation.

3. Bureaucratic red tape resulted in undue delays in many businesses getting their GST refunds. Some RM20 billion never made it to them under Najib’s regime.

The Rakyat revolted. Predictably.

It became an election issue and was the second reason why PH managed a giant-killing act against UMNO/BN and won the 14^th General Election held on 9^th May 2018. The main reason was endemic CORRUPTION, in particular, the RM30 Billion plus fraud at 1MDB and the related RM4 Billion fraud at SRC, a wholly owned subsidiary of the Ministry of Finance. In a nice postscript to GE14, Najib was convicted on 7 charges of abuse of power, money-laundering and Criminal Breach of Trust (CBT) in July 2020. He was sentenced to 12 years in prison on one charge and 10 years each on the remaining 6 charges, for a total of 72 years, the sentences to run concurrently. He was also fined a whopping RM210 million. He is now appealing his conviction and not yet in prison.

Now, there are said to be murmurs and whispers from “International Rating Agencies” (IRA), “leading economists, financial and tax experts” and “informed analysts” about re-introducing GST. The clincher is of course that the International Monetary Fund (IMF) and the World Bank (WB) are said to have “grave concerns” about Malaysia’s “dwindling revenue and tax base”. Except, I recall that the IRA, leading economists, financial and tax experts, informed analysts, the IMF and WB all said the same thing in 1997 – at the height of the Asian Currency Crisis – and here we are some 24 years later and still alive and kicking.      

I say to hell with it. NO GST yet for another 5 years at least, especially now that we are in the midst of an economic crisis brought on by the pandemic. All the “anonymous informed experts’ can stick it up where the sun don’t shine.

Why?

There is an unwritten social contract between a government and its citizens. BEFORE the government comes around and puts its grubby hands in our back pockets again for another whack on our wallets, it must come to the tax table with clean hands. That means the government must first rationalize its expenditure and employment numbers.

It must first trim the 1.7 million-strong civil services and their approximate RM111 Billion annual cost of salaries, allowances, perks, bonus and pension budget. That makes up a staggering 47% of the government’s operating expenditure budget of RM237 Billion for 2021. To be fair, we must remove the army, navy, air force, reservists, teachers, professors, lecturers, doctors, nurses, engineers, scientists, researchers, architects, police, firemen, etc. from the 1.7 million figure, to determine the pure administrative headcount of the civil service. Everything should then be benchmarked against international norms and downsized accordingly. That way, we can compare apples to apples. There are international benchmarks for just about everything – doctors/dentists/telephones/cars per thousand of population, teacher-student ratios, size of army etc.

I am also not so heartless as to suggest that we sack people ruthlessly and dump them in the scrap heap. They are human beings, our fellow citizens and deserving of our respect, empathy, concern and care. So, downsizing and retrenchments must be phased over 3 years during which the excess staff should be paid their normal salary and placed in fully government funded re-training programs so that they can be gainfully re-employed in the private sector. For those who cannot be re-trained or are too old, we, The People, will have to subsidize them. Some form of Socialism is acceptable and necessary. Others have done it successfully all over the world, so can we.

A similar exercise must take place at Petronas, government controlled banks & financial institutions, public institutions, Government Linked Companies (GLC), enterprises and Statutory Bodies.

The third revolution needs to take place at the Income Tax Department (ITD).

The ITD must revise its mission statement and include as its primary task, the maximization of tax collection from every source – tax evaders ranging from cash businesses and professionals under declaring their revenue collections, to rich individuals, tycoons, businesses, companies, public listed companies and Multi-National Corporations which engage tax experts to avoid and evade tax via dubious tax planning schemes and salt huge profits away in off-shore tax shelters and havens, in countries and places like Zurich (Switzerland), Mauritius, Luxembourg, Guernsey, Jersey, Bermuda, the Bahamas etc.

Lastly, the government must put a stop immediately to all wasteful expenditure. White Elephant and fraudulent  projects and continuously bailing out businesses with Taxpayers’ money out of a false sense of patriotism must cease. E.g.:

1. RM30 Billion fraudulent inflation of ECRL in 2017 and RM20 billion gas pipe directly negotiated contracts.

2. Some RM20 Billion splashed on loss making MAS over the last 30 years. Who was it who said “Patriotism is the last refuge of the scoundrel”?

3. RM10 Billion free grant to Tabung Haji.

4. RM8 Billion bailout of Felda.

5. RM1.3 Billion budget for JAKIM.

6. A bloated cabinet of 69 Ministers/Deputy Ministers and sinecure, ridiculously high-paying jobs for unqualified MP's and cronies at GLC’s, Statutory Bodies, Universities, public institutions and Quangos, costing over RM1 billion a year. Government must not be fearful of taking the scalpel to the accumulated fat layers of bureaucracy.

I dare say that if our government follows this advice, that we will be able to defer GST for a good ten years. I will not be surprised if by taking these measures, the government will have at least an additional RM30 Billion a year extra money to do the really useful things for us.

This will also be because, if the government performs dutifully and successfully, the economic pie too will grow bigger in tandem. Then, so too will tax revenues. All the economic indicators – GDP and real growth rate, inflation, income levels and the poor vs rich share of the economic cake, balance of payments, exchange rate, debt: GDP ratio, reserves etc. – will start to make sense. We will attract Foreign Direct Investments (FDI) like there’s no tomorrow. The stock market will boom to record levels.

So, NO to GST! NO to Capital Gains Tax! NO to Capital Transfer Tax! NO to Estate Tax! NO to any new tax until the government first gets its act together!

We have paid enough taxes and bailed out our country which has indulged in some of the world’s worst profligate, rash, outrageous and fraudulently corrupt spending acts over the last 20 years. If you give more money to a government of thieves, it will only end up in the pockets of crooked politicians and their cronies. Now, it’s time for our country to alter its course, get cracking and instead do something for 'WE, THE PEOPLE'. To misquote US President John F. Kennedy:

“Ask not what you can do for your country; ask what your country can do for you!”