Johari lays out how Harapan could continue GST
Published:  Aug 13, 2018 3:55 PM
Updated: 4:31 PM

Former finance minister II Johari Abdul Ghani has laid out how the Pakatan Harapan government could continue the GST scheme.

He said if the coverage of goods and services that are taxable under GST is too broad, then the government could simply reduce the types of goods and services that are taxable by zero-rating it.

If the rate is too high, the government could reduce it from six percent to four percent; and if the GST refund process is problematic, there are ways to address that.

“If the refund process is too problematic and is driving up prices, as I’ve said before, we can fix that if we pay refunds on a ‘nett of’ basis.

“Prices, if we say six percent is too high, we could make it four percent. Then we’d have to tell the people that we are reducing it from six percent to four percent, but we’re cutting your BR1M, your farmer’s assistance, and subsidies,” he said.

He was speaking during a video interview aired live on Umno Online’s Facebook page tonight.

He was responding to a question whether the GST scheme implemented by the previous BN-led administration can be deemed oppressive since there are some 40,000 goods and services taxable under GST compared to some 20,000 under SST to be implemented under Harapan.

Johari said the two policies can’t be compared, since different governments have different policy objectives.

In BN’s case, he added, it was to tax more goods, but at a lower rate compared to SST and then redistribute it to lower income groups.

However, he pointed out that GST can also be made to cover few items, while also touting benefits such as being more transparent and being able to tax the “black economy”.

It also avoids the problem of double taxation, he said, providing an example of a can of carbonated drink that may be imposed a 10 percent sales tax when manufactured, and then another six percent service tax when served at a restaurant.

Johari also explained that when he was the finance minister receiving complaints about GST input tax refunds being delayed, he had proposed that some companies can be paid refunds without having the claims verified first.

Under this proposed scheme, companies with a track record of good recordkeeping would be certified as such, and would be allowed to claim input tax credits on a nett basis but would be subject to an annual audit.

This would help expedite the payment of GST refund credits.

However, all this was too late as the Dewan Rakyat had already voted to abolish GST.

Johari said GST refunds are delayed or withheld usually because the documentation submitted by companies are incomplete, or fraud is suspected.

And when the Royal Customs Department asked for more documentation, he said companies or their accountants sometimes don’t respond to the department's emails and phone calls.

Businesses also sometimes try to defraud the department by filing input tax credit claims on goods still held in their inventory, which may have been sold but have yet to be delivered.

Johari also disputed Finance Minister Lim Guan Eng’s claim that there is an RM19.248 billion shortfall in the GST Refund Trust Fund, which purportedly led to delays in paying the input tax credits. 

To a question, he said the money is “100 percent not missing”.

He said government procedures require all revenue including GST to be placed in the Federal Consolidated Fund where it is used for government expenditure as approved by the Parliament through
the supply bills.

A group of civil servants would then decide on how much money is needed in the trust account to make payments each month, and then apply for that money from the consolidated fund.

“When you put money in the trust fund, you have to be specific. This means claims that have been finalised, confirmed pass, and would have to be paid. This is the money that has to go into the trust fund.

“Of course (only the claims that have been verified). If not, people will file their claims and you put money in the trust fund, but what is the money doing sitting there?” he said.

If given an opportunity, he said he would ask the Customs Department for a breakdown of how much of the arrears in GST refunds had been withheld because of incomplete documentation, or suspected fraud.

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