Penang Chief Minister Lim Guan Eng has urged Putrajaya to abolish the goods and services tax (GST), claiming that some businesses have been unable to make profit throughout this year due to the policy.

"Prime Minister Najib Abdul Razak must admit the failure of his economic policy by abolishing the GST when the 2017 Budget is presented to Parliament next month, so as to revive economic growth and put money back into the pockets of wage earners.

"The economic situation has gone from bad to worse, with some businesses complaining that they have not had a single profitable month for the nine months of this year, while wage earners are not having enough money to make ends meet," Lim said in a statement today.

He said the federal government was behaving like an "ostrich putting its head in the sand" by insisting that the country's economy is performing well with a four percent growth in the second quarter of this year.

The apparent growth did not benefit businesses and ordinary Malaysians, Lim said, based on the latest GST collection data, which showed a 30 percent drop in the second quarter of this year.

A fall in GST collection is an indication of reduced sales and consumption. The GST was implemented in April 2015.

"Many economists were surprised that despite the four percent economic growth in the second quarter, GST declined by 30 percent or RM3.1 billion from RM10.2 billion in the first quarter of 2016 to RM7.1 billion in the 2nd quarter.

"GST is the cause of our economic problems. The RM 3.1 billion drop in GST collection for the 2nd quarter of 2016 proves that the GST had resulted in the rakyat facing poorer business and less income," Lim said.

'Businesses should not be victimised'

He said the federal government should not be victimising businesses to cover its revenue shortfall.

"The federal government should not try to cover the GST revenue shortfall by victimising businessmen in the form of tax investigations to squeeze more money for the BN federal government.

"Many businessmen have complained of unreasonable demands and double-standards of the Internal Revenue Service (IRS), when the IRS failed to do the same on BN politicians receiving huge donations," he said.

Lim said it was alarming that the Customs Department was still confident it could achieve the RM39 billion target in GST collections this year.

"Clearly, the federal government will face a shortfall in the expected revenue of RM39 billion as it has only collected RM17.2 billion from GST for the first half of this year, way below the targeted yearly revenue of RM39 billion.

"The Malaysian government is already facing a revenue shortfall of RM16 billion this year because Petronas will only be paying RM16 billion to the government, half of the amount contributed last year, before the drop in global oil prices," he said.

Lim added that even state and local governments were not spared of GST despite not-for-profit public works.

"For example, the Penang state and local governments as well as state agencies have to pay RM48 million yearly in GST to the Federal government," he said.

Lim pointed out that Australia returns any GST collected from a state back to the same state but this was not something emulated by Putrajaya.

He said the federal government will not need the GST if it took decisive action against corruption.

The federal government ran out of money because of corruption scandals, such as 1MDB and the RM4.2 billion, donation scandal.

"If firm action is taken against corruption, not only can BR1M payments to the poor continue but the economy can be revived by abolishing the failed economic policy of implementing GST," Lim said.