Anwar's RM1.5 trillion debt disclosure a precursor to GST reinstatement?

NST Mon, Jan 23, 2023 11:18am - 1 month View Original

One notion was that the prime minister was preparing the nation for the reintroduction of the Goods and Services Tax (GST) in the 2023 Budget to boost government coffers. NSTP/ASWADI ALIAS.

KUALA LUMPUR: When Datuk Seri Anwar Ibrahim shares that Malaysia's national debt now stands at a whopping RM1.5 trillion, some crank up the possible reasons for the disclosure.

One notion was that the prime minister was preparing the nation for the reintroduction of the Goods and Services Tax (GST) in the 2023 Budget to boost government coffers.

Economists, however, dismissed this idea.

They felt that reintroducing the GST, despite it being seen better and fairer than the current Sales and Services Tax (SST), would be "extremely unpopular" to the government, for now.

Malaysia University of Science and Technology economist Dr Geoffrey Williams said in pointing out the debt level, Anwar quite rightly stressed the need for fiscal prudence to keep spending at a sustainable level and improving the efficiency of government sector.

"He is emphasising that the wastage, poor procurement practices and corruption is very costly and this raises debt. This is completely correct. It is not, in my view, a preparation for GST but a preparation for fiscal reforms on both spending and revenues," he told the New Straits Times.

Williams also pointed out that Anwar had long been sceptical of GST. "So I do not think this is his preference."

Putra Business School MBA programme director Prof Dr Ahmed Razman Abdul Latiff also does not think that Anwar is preparing the nation for GST.

Instead, he saw the need to have a balanced budget by reducing the annual budget deficit through slightly reduced expenditures.

"I don't think the public is ready for GST at the moment as it will become extremely unpopular to the government," Ahmed Razman added.

Juwai IQI chief economist Shan Saeed said GST could support government efficiency in raising the ratio of tax to gross domestic product.

"As comparison, SST is not transparent, complex, has leakages and huge anomalies. Not many countries are following SST which is arcane and not consumer-friendly.

"GST in 2016-2017 generated revenues for the government and bolstered its balance sheet. Stronger balance sheet of the government is beneficial for the economy at the macro level," Shan said.

The GST was introduced in April 1, 2015 at a rate of six per cent under the then prime minister Datuk Seri Najib Razak.

GST collections in 2015 was reported to be at RM27 billion or 12.3 per cent of the government's overall revenue of RM219.1 billion.

The amount collected swelled to RM41.2 billion in 2916, or 19.4 per cent of the RM212.4 billion government revenue, before rising further to RM44 billion in 2017.

In 2018, GST was abolished after Pakatan Harapan won the 14th General Election.

Bank Islam Malaysia Bhd chief economist Firdaos Rosli said the country needed a taxation regime such as GST.

But if GST was to be reintroduced, the rate should be lower, perhaps starting at two to three per cent, he added.

Firdaos said the government could take the Singaporean approach when introducing GST.

The republic started it at three per cent in 1994 before gradually increasing to eight per cent so far.

He, however, believes the time is not right to reinstate GST.

"The appropriate rate if it is implemented again is probably between 2.0 per cent and 3.0 per cent. However, if asked about the appropriate time, there is no suitable period especially considering the current economic environment."

Firdaos said any measures to reintroduce GST, or adjust subsidies, would have an impact on inflationary pressure in the medium term.

"We forecast headline inflation to hover at an average of 3.0 per cent this year compared to 3.4 per cent last year based on the assumption that the government will maintain current fuel subsidies," he added.

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