Points to note about Malaysia’s scrapping of its GST

by Ho Weishan

Many so call “experts” are so concerned about the abolishment of Goods and Service Tax (GST) in Malaysia and worry about the country fiscal budget. But there are two points that are worth pondering before we accuse Malaysia of impending budget disaster.

The first is that the MYR$42 billion collected by the Barisan Nasional government according to their budget debate in parliament was not spent on the country fiscal budget. In fact, many suspect that it was squirreled away to pay for sovereign debts incurred by Najib. Therefore the absence of this amount would not affect the country fiscal position.

The second is that while many had ignored a very valuable hidden feature of the economy is the dollar multiplier effect brought about by a massive MYR$42 billion. The GST not collected by the state would not disappear into thin air. Instead, it would be returned and circulated in the local economy many times over, stimulating the economy and indirectly increase government other avenues of tax collection.

And do not forget, the savings resulting from having to pay for services incurred in order to collect GST from consumers, from Point of Sale to accountants, etc. This is a substantive amount of money returning to the local economy.

All in all, GST is broad-based value added tax levied on goods and services and it is often viewed as regressive tax instrument. It is merit is often questioned and doubted especially when people did not see a direct improvement or betterment in their lives resulting from GST, especially in Malaysia.

The return of sales tax would be a more direct and target form of taxation that would not overly burden the common folks. The sales tax is taxed at only one stage and certain items ie. food, are exempted.

Pro-ruling party Internet Brigade (IBs) would like to continue to preach doomsday theory because they do not want Singaporean to tarry and flirt with any sexy ideas of possibility of an opposition tsunami in Singapore. They want to see failures in Mahathir led Pakatan Harapan.

Let us not wish evil on our neighbor. Sometimes the value of keeping quiet surpasses that of our economic dissection of their policies.

This was first published on Ho's Facebook page and reproduced with permission.

This entry was posted in Opinion.

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