Sabah and Sarawak are pressing for an unspecified moratorium on the implementation of the GST (goods and services tax) beyond the mid-2011 implementation date.

container cargo ship 260209 Alternatively, the states want to do away the National Cabotage Policy (NCP), which inadvertently increases the cost of goods from Peninsular Malaysia, if the GST is to be extended to them.

Federation of Sabah Manufacturers (FMM)’s Wong Khen Thau is leading the charge for a moratorium on the implementation of the GST beyond the mid-2011 target date.

“I do not think that it (mid-2011) is the right time for Malaysia (Sabah and Sarawak) to implement GST. We have to wait until most consumer prices are around the same level (everywhere),” said Wong, who gave the FMM’s official take on the GST.

“The goods in Sabah, for example, are already priced at least 20 percent higher than those in Peninsular Malaysia.”

The major grouse is that the GST “appears to be moving towards implementation without taking into consideration the market situation in Sabah and Sarawak”.

NONE One sore point, according to Wong, is that the rural folks who are not paying any taxes now will be especially burdened by the GST which imposes a 4-percent across-the-board tariff.

This is expected to place even more than the present 23 percent of people under the poverty line in Sabah.

“Generally, consumers in different areas of Sabah will be affected by the disparity in prices between Peninsular Malaysia and Sabah, and within the state,” said Wong.

“For example, if the price is higher in Keningau, the collections via GST will be higher as well although the 4 percent remains.”

The additional paperwork involved for the business community under the GST is another beef with the new tax regime. The costs are also expected to be passed on to the consumer. But these are not the least of the problems for businesses.

“Factory operators and wholesalers will face problems too because their products will have to include GST when sold to retailers and subsequently this will be passed on to the consumers,” worries Wong.

“The government should separate wholesalers and retailers from the final consumer.”

A double blow

The FMM chief reiterated that the taxes aside, Sabahans and Sarawakians will be paying even higher consumer prices than now if the GST is introduced in the two states, especially with the National Cabotage Policy (NCP) staying in place.

Consumer prices in Sabah and Sarawak are linked to the NCP.

In short, the NCP reserves carriage in local waters for Malaysian ships and designates Port Klang as the national load centre. This means that all international shipping can only call at Port Klang for Sabah and Sarawak. This translates into higher consumer prices at the receiving end.

Hence, in the wake of the GST, there is renewed urgency for doing away altogether with the NCP which has burdened Malaysian Borneo with higher consumer prices vis-à-vis Peninsular Malaysia.

It is held that the GST, coming on top of the NCP, will be “a double blow to the long suffering consumers in Sabah and Sarawak”.

“This is like adding insult to injury,” said those in business and consumer circles. However, if the miniscule contribution of Petronas to the state coffers in Sabah and Sarawak is considered, then it becomes a triple blow.

Wong appreciates the benefits of the GST “from the government’s point of view”, which is the control and reduction in tax evasion.

It is also to help the government to overcome its declining revenue from the oil and gas sector as Petronas runs out of concession areas to award to international contractors.

The tax moratorium move comes despite the federal government keeping the exact details of the GST mechanism under close wraps.

All that is known is that the GST, as it stands, would mean a nationwide 4 percent tax across the board. But that has been enough to set off alarm bells ringing in Sabah and Sarawak on the prospect of further hikes in the cost of living.

Let there be an Open Port policy

On the plus side, should the GST result in the abandonment of the NCP, Sepanggar in the outskirts of Kota Kinabalu is likely to emerge as a regional hub port.

Even with Port Klang remaining dominant on the east-east trade, Kota Kinabalu is already poised as the preferred hub in the north-south route.

“Geographically, Kota Kinabalu or Kudat for that matter, is more centrally located to places in east Asia and onward to Australia, New Zealand and the South Pacific,’ argues Chang Sui Loon, Head of Economic Affairs, Sabah Federation of Chinese Associations.

“Port Klang or Bandar Seri Begawan can’t replace Kota Kinabalu’s strategic location.”

According to Chang, what the Open Sky policy has done to turn Kota Kinabalu into the busiest airport in Malaysia after Kuala Lumpur International, can also be done with an Open Port policy.

This would mean lower consumer prices for the long-suffering residents of Sabah.