Just when the price of a wide range of consumer products has more or less stabilised after the 6 percent Goods and Services Tax (GST) imposed in 2015, the government’s decision to withdraw the subsidy for cooking oil after Deepavali is bound to create a new price spiral that will affect consumers especially during the present economic slowdown.
In previous years the government has withdrawn the subsidies of many items and this has led to an increase in the cost of living. The government’s reason is understandable as it wants to reduce the subsidies to the non-target groups and ensure that the money saved is channeled through schemes like Bantuan Rakyat 1Malaysia (BR1M) that benefit the lower income group.
The government needs to ensure that cooking oil derived from palm oil does not shoot up to high levels. As a major palm oil producer the country needs to ensure that the palm oil price are reasonable - and this can be done by using funds from the palm oil windfall tax collected from the palm oil producers.
In Malaysia, the subsidy scheme has become a problem due to a lot of ‘distractions’ as it also benefits the 5 million foreign workers, the 20-30 million tourists as well as the millions of people crossing over from Thailand and Singapore as these groups avail of the subsidies, which should be focused only on the nation’s lower and middle income groups.
The result is that the government has to fork out extra billion in subsidies, and it understandably wants to eliminate this calloused waste. However, some subsidies need to be provided to reduce the cost of living as such the government needs to introduce a ‘subsidy card’ to the BR1M group to purchase subsidised items at certain supermarkets and retail outlets. In many countries this system is used to help the target groups.
Another disturbing factor revealed during the 2017 Budget was the lower than expected GST collection of RM30 billion. Given the size and strength of the economic and business sectors, the collection should have been higher and considering the hardship faced by the poor. The PM said that it will be RM40 billion next year.
It is time the government investigated the lower collection as it is possible that many businesses and firms are not paying GST and have found loopholes to bypass the tax. It is not right that the poor should pay the full GST but businesses should circumvent. The GST should not end up like the previous service tax which was mainly pocketed by the businesses.