Challenge to opposition: Propose alternative to GST

KUALA LUMPUR • Malaysian Prime Minister Najib Razak has asked the opposition for a credible alternative to Malaysia's unpopular 6 per cent goods and services tax (GST).

He was responding to former premier Mahathir Mohamad's declaration that the opposition would do away with the tax if it came to power at the next general election.

The Malaysian government introduced the GST in April 2015, with the tax widely blamed by the public for spiking the cost of everything from street food to supermarket goods. The weakening ringgit has added to the rising prices of imported goods in the past two years.

Datuk Seri Najib said GST collection totalled RM40 billion (S$12 billion) last year, and has said that it helped to boost government revenues at a time when the income from national petroleum company Petronas dropped sharply due to lower global price of oil and gas.

"It is okay to have differences of opinion, but please give us a better alternative than what we are doing today," Mr Najib said at a political gathering on Wednesday in Kedah, as quoted by FreeMalaysiaToday (FMT) news site.

Last Saturday, Tun Dr Mahathir, speaking at the launch of his new political party, received a standing ovation when he said the opposition would replace the GST with a sales tax that the public can accept.

Malaysia previously had a 10 per cent sales and 6 per cent service tax that was replaced by the GST.

Malaysia's Institute for Democracy and Economic Affairs (Ideas) said a sales and service tax would bring in only half the GST revenue. "So we would have to raise the revenue some other way to make up" for the shortfall, Ideas external relations manager Azrul Mohd Khalib was quoted by FMT as saying.

Malaysia has more than one million civil servants, whose salaries had in the past been mostly backed by Petronas revenues.

"With current oil prices and continued support for 1.6 million civil servants, compounded by the fact that Malaysia is now a net importer of oil, abolishing the GST would just increase the (government's budget) deficit," Mr Azrul said.

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A version of this article appeared in the print edition of The Straits Times on January 20, 2017, with the headline Challenge to opposition: Propose alternative to GST. Subscribe