Reduce GST rate but don’t reintroduce SST

If we need only RM21 billion from the SST, we could reduce the current GST rate which yields RM44 billion to a rate much lower than 6%.

TK Chua, Free Malaysia Today

There is a need for caution in abolishing the GST and bringing back the SST. It is not going to be as simple and straightforward as we think.

The Pakatan Harapan (PH) government has made U-turns on some of its promises. So I guess it is okay to negate another of its promises – i.e. not to abolish the goods and services tax (GST) but at the same time not to reintroduce the sales and services tax (SST).

My view on the GST is not to mimic that of Khairy Jamaluddin or the former prime minister. I wrote a piece way before the 14th general election, on March 23, urging the PH coalition not to abolish the GST and not to reintroduce the SST if it won the election.

Malaysia is not known for its efficiency in implementing new taxes. When the 6% GST was first introduced, prices escalated way beyond the 6% rate for whatever reason. After three years, the GST finally stabilised and became part of the system.

Thus far, according to reports, removing the GST has not brought down prices as envisaged. But reintroducing the SST as planned will likely cause another round of havoc in the marketplace. Prices will probably escalate beyond the SST rates, just like when we first introduced the GST.

The general election is over. If we need more “studies” to recognise the UEC and abolish BTN, surely we can do the same on the GST and SST. After all, the prime minister has said that nothing in PH’s manifesto is cast in stone. In fact, PH has also reneged on its promises on the appointment of the Dewan Rakyat speaker from among the sitting MPs as well as on scaling down projects that were previously approved.

As much as we dislike the GST, the tax system has been with us for about three years. I urge caution in abolishing it and bringing back the SST. It is not going to be as simple and straightforward as we think.

I urge politicians to be careful with the people. I don’t think the people are in the mood to face another round of inordinate price increases in the marketplace.

If we set our political differences aside and think about the long-term good of the country, the GST is in fact a much more robust taxation system than the SST. It is a system that provides better accounting and reduces tax evasion and avoidance even for direct taxes.

If the SST is to compensate for revenue loss due to the removal of the GST, I think it would be much better to reduce the GST rate to a level that is sufficient to generate the same amount of revenue as the SST. If we need only RM21 billion from the SST, we could reduce the current GST rate which yields RM44 billion to a rate much lower than 6%.

Please don’t keep arguing that the impact of the SST will be minimal when the removal of GST thus far has not brought down the prices as envisaged. When the SST is imposed, the people will effectively be paying SST on top of prices which “include” GST.

Given the present political climate in the country, I don’t think the new government is in the mood to listen. We shall all wait and see. After all, who am I compared with the new finance minister and all the wizards in the new government?