Malaysiakini Letter

ECRL - Impose GST but arbitrage the cost difference

Saleh Mohammed  |  Published:  |  Modified:

LETTER | I refer to the Malaysiakini report ECRL - Gov't confirms GST relief for Chinese firm.

I am a simple-minded retired Malaysian who reads the newspaper everyday to keep me updated on what is happening around the world.

Since Parliament was dissolved recently, my focus is on local news to help me decide which party to vote for in the coming general election (GE14).

My concentration as with other Malaysians is news on cost of living, the goods and services tax (GST), crime prevention and corruption to name a few.

I was shocked after reading the above article in which when the customs director-general confirmed that the China Communications Construction Sdn Bhd will be given GST relief for the acquisition of goods and services for the East Coast Rail Link (ECRL) project.

This because it is a method to reduce the cost of implementation. He also said that the interest rate of the loan given for the project was "better" than the cost of GST.

The confirmation came as a result of a so-called “senseless” statements about the GST and government projects from an opposition member.

For the record, for the last three years I have been made to believe that the GST system was proven to reduce the price of goods and that came from a minister who even guaranteed it.

The RM55 billion ECRL project, owned and operated by a subsidiary of the finance ministry, secured a soft loan from the Export-Import Bank of China.

A strategist said it does not make any sense for the government to pay GST to itself. Indirectly he confirmed GST will increase cost by saying:

"With GST, (it) will raise the total amount of loans and hence the interest. It is better to grant the company an exemption, which is provided by the law to reduce unnecessary processes and expenses”.

Poor me, retired and unemployed, I have to pay GST for almost everything including withdrawals from my Tabung Haji account to be transferred to my current account.

A simple-minded me would have thought that it would be better to impose GST since we had a good and attractive deal on the soft loan.

Since the interest rate of the loan was "better" than the cost of GST, we could arbitrage the cost difference.

The government could exploit the difference and in the process pocket a risk-free return. The three over billion ringgit GST portion could be used for more attractive projects for the rakyat.

This opportunity does not come very often especially when we have a seven-year relief from servicing of the loan.

And as the prime minister said, by then the ringgit would have appreciated and the interest would be almost negligible.

I stand to be corrected.

What say you…

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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