DAP dismisses PM’s explanation on GST

Written by Yong Min Wei, The Edge   

DAP is adamant the goods and services tax (GST) is a regressive tax under current economic conditions and has dismissed the explanation given by Prime Minister Datuk Seri Najib Razak on the need to implement the value-added tax.

Its national publicity secretary Tony Pua said implementing GST, at any rate on the backdrop of a recovering economy, would particularly be a burden to the low- and middle-income groups, as the poor and the rich would be imposed the same amount of tax when it is imposed across the board.

“GST is a regressive tax as the poor pay the same as the rich. In such a tax system, the poor will suffer more than the rich,” he told a press conference in the parliament lobby Dec 7.

Pua pointed out that although the government planned to have some exemption on basic goods and even compensate the poor on GST payments, the exemption would not be able to cover the 85% working Malaysians who do not pay taxes.

“The most the government can do is to exempt 5% of working Malaysians who don’t pay tax. So, the balance of the working Malaysians that don’t pay tax will suffer with GST,” he opined.

Last week, Najib announced that the government would proceed with the GST in a “structured and gentle manner” whereby the new taxation regime would be introduced in a “neutral fashion” in line with the current levels of the sales and services tax.

The premier said Malaysia’s income and growth has been dependent on oil revenues and as such the government’s goal in GST was not to tax basic goods and services, but to broaden the revenue base so that the country would not be overly dependent on one sector to fuel growth.

According to Pua, it was paramount to raise the income of the people to ensure that more working Malaysians would first pay tax before implementing GST across the board with appropriate exemptions for the poor.

“Then the switch from income tax system to GST system will not be that heavy on the people,” noted Pua who is also MP for Petaling Jaya Utara.

He also hit out at the government for over-reliance on oil and gas revenue to run the country, adding that it was incorrect for the government to suddenly tax the people when it realises there was insufficient revenue from a particular source of income.

Pua stressed it would be wise to raise the productivity of the people so that they could earn more and by investing prudently the income the government received from oil and gas, noting that such move would see productivity increasing and consequently raise the income of the people as well as the tax revenue for the government.

“Singapore for example has lower income tax rates than Malaysia but their income collection is much higher even though they have no petroleum sector to depend on,” he said adding the island republic managed to raise the productivity of its people.

The government announced in November that it planned to introduce a 4% GST and that the value-added tax is expected to be implemented 18 months following the second reading of the GST bill in March next year.