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We need ‘painful’ economic reforms, not GST

Dr Dzulkefly Ahmad

The PM has finally taken heed of our critique on the GST. Or has he really? That’s how it seems for now. But you really couldn’t tell from this move as to why he defers the second reading of the the BIll on GST. It could have been done to evade that ugly demonstration of the Pakatan’s MPs and the NGOs that would have otherwise marred the opening of the new parliamentary session by the Agung (Constitutional Monrach).

This writer ( a member of the Ant-GST Task Force) however would like to believe that the PM has finally taken heed of all the critiques, not the least or perhaps most seriously from the Federation of Malaysian Manufacturers (FMM). The cost to both the government and businesses is monstrous.Australia paid A$4.8bilion when it implemented the GST 10 years ago. It may cost us in total (to be GST-compliant), close to RM4.5 bilion (public and private) with 200,000 companies or persons as ‘taxable persons’ under the new GST as opposed to the 50,000 under the old SST regime.

The BN government is now saying that they would like to listen more extensively from the people, the rakyat. Strange. Not after all these debates in the first reading in the parliament and especially if one considers that this is second attempt at tabling this new taxation system (after 2002), which is a onerous, massive and pervasive one! So they are now saying that they have forgotten to engage the rakyat.

Didn’t they want to even seek the rakyat’s perception and take, on the GST earlier? Only after the Pakatan’s Anti-GST Task Force took on the offensive and later on joined by the NGOs, did the BN government realise that the GST is after all not well received and perhaps vehemently opposed save by the greatest beneficiary, the tax accountants, not all though.

The downfall of the Conservative Government in Canada as a result of GST’s implementation, flies in their face.Pakatan reiterates our stance on the GST. We are not against the GST per se. However, Pakatan is totally against its reckless implementation and especially not when the nation’s economy is at its critical time to undergo ’fundamental and structural’ reforms, in what is now hyped to be the “New Economic Model” – it better be one, ie deconstructing the old model of ‘patronage’ and ‘protectionism-affirmative’ action to the wrong target groups.

The economy is in dire strait and in need of rigorous reforms to place it back on its league, in consonant with our status as amongst the richest economy in term of resource per capita. Najib and his party must be weaned of of their crutches and rent-seeking mindsets. That’s is going to be painful.

Pakatan strongly proposes few prerequisites to be put in place before attempting to replace the current SST. Though the initial 4% rate for the GST may look appealing and enticing enough, this sugar-coated medicine, may actually become the medicine that kills the patient.

Reiterating, the nation needs to address, the low-income trap as only 15% atau 1.5million of the work force pay income tax. Real wages of in the domestic sector, according to the World Bank, has only grewby a mere 2.6% between 1994 and 2007. That’s well beyond a decade of stagnation in term of real wages growth (after taking account of inflation). The economy must be allowed to propel into a higher income economy based on productivity (keeping cost-per-unit down) in knowledge-intensive industries and activities. No two way about it.

That’s the way forward. Growth should now be generated through private investment (both local and foreign) and not merely by pump-priming of the G-factor (in the GDP) in infrastructural mega-projects by the government, excercebating the already yawning deficit of 8% (yes not 7.4% as claimed) in 2009. We need the quality foreign investment (FDI) not so much of the portfolios investment or the hot-money. More importantly, we need to reverse the outflow of capital ie getting our local investors to fund growth and industries hence employment locally in higher value-added activities.

Together with the real wages issue, is the urgent need to close-up the widening income disparity. Our income, let alone equity, disparity is about one of the worst in the world, close to perhaps papua new guinea. It’s quite meaningless talking about improving income per capita when the income disparity is malignant. The NEM must seek to improve both before GST is put in place.

Finally, back to the bone of contention. Why must the government ‘victimise’ the rakyat for new revenue source and stream. Is that the true meaning of Rakyat-First’s slogan of the PM? That is to be first victimised!

We have argued and proposed that the Federal Government plucks all holes of leakages and stop the haemorrhages through ‘best practice’ and good governance in procurements and the entire delivery system. The Auditor General’s report alluded a saving of RM28 bilion a year if these measures are put in place. That’s RM27 bilions more than the mere additional RM1bilion the government is targetting in the first year of the GST implementation.

How about the APs that could be monetised through an open-tender system which could easily bring in a revenue stream of RM2bilion yearly, depending on how much the government wants to tender the 60-70,000 APs yearly. Stop subsidising the non-deserving private sectors eg IPPs etc and stop crony practices and bailouts as in rewarding Syabas, a private company closely linked to the Federal Government, a RM320 interest-free loan facility that is also unsecured and backloaded. That BN has a penchant for giving such handouts and patronising rent-seeking activities is globally recognised, hence the reason why we are in these unending economic woes.

We are in serious need of concrete but perhaps ‘painful’ reforms. If the PM insists of pacifying the rakyat through this delay tactic, he cheats no one save himself. He does it at his peril again!

* Tulisan di atas adalah pandangan peribadi penulis dan tidak mewakili pendirian tidak bertanggungjawab terhadap sebarang implikasi daripada tulisan berkenaan.

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