Malaysiakini News

Harapan’s alternative budget: Responding to the critiques

Ong Kian Ming  |  Published:  |  Modified:

MP SPEAKS | I have been digesting the comments and commentaries made about the 2018 Budget announced last Friday by Prime Minister Najib Abdul Razak and also the Pakatan Harapan alternative budget. I want to use this opportunity to address several critiques directed at the Harapan budget, starting with our proposal to abolish the GST.

One of the major critiques levelled against the Harapan alternative budget is that we are not being responsible or realistic by advocating for the abolishment of GST. The following are the responses to some of these critiques:

1. Critique: Companies have spent millions, if not billions in implementing GST system. Won’t all this money be wasted if we get rid of GST?

Response: We will not get rid of the GST system. All of the items which were not taxed during the Sales and Services Tax (SST) regime will be "zerorised", ie zero percent GST tax rate. All of the items which were taxed at the point of production during the SST regime will have the same tax level at the point of production. Therefore, we will use the existing GST system to collect SST related taxes.

2. Critique: Why not say you will ‘zerorise’ the GST rate rather than saying you will get rid of it?

Response: Most Malaysians do not know the meaning of "zerorising" GST or the difference between goods which are zero-rated versus exempt.

The effect on the consumer will be that they no longer have to pay GST so this effectively means we are getting rid of it.

3. Critique: Will there by a reduction in the price of goods and services if you get rid of the GST? Wasn’t GST already priced in during the implementation phase in 2015 and 2016? Aren’t the price of goods and services "sticky" downwards?

Response: When we get rid of GST, consumers will expect prices to go down. Even if retailers don’t decrease prices by six percent, there will be competition between retailers to offer at least some discounts in order to attract customers. Getting rid of GST puts downward pressures on prices on the whole system.

Also, by collecting fewer taxes (by going back to the SST regime), we are directly and indirectly putting money back into the wallets of consumers and business and this will have a healthy multiplier effect on the economy.

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