Pakatan vows to remove GST

Malaysia's opposition alliance says promise is not a 'populist act'

Malaysia's opposition pact Pakatan Harapan (PH) has promised to abolish the unpopular 6 per cent goods and services tax (GST) if it comes into power at the next general election, as it seeks to allay voter concerns over the rising cost of living.

The four-party alliance says revenue from GST, which helped the government raise RM41 billion (S$13.2 billion) last year, could be replaced by higher revenues derived from a boom in consumer consumption and business activity.

"Our policy of eliminating GST for 2018 is not a populist act but is primarily rooted in the need to rejuvenate consumption," the opposition said in a report yesterday.

The opposition releases its alternative Budget every year ahead of the announcement by the government. Prime Minister Najib Razak, who is also Finance Minister, will present the 2018 Budget tomorrow.

The GST was introduced in April 2015 to replace the sales and services tax (SST).

Datuk Seri Najib has said GST replaced revenues lost by national oil company Petronas due to lower global petroleum prices.

But the broad-based consumption tax has been widely blamed for steep inflation since its introduction.

To replace the tax, the opposition plans to bring back the narrower-focused SST in the short haul, while it looks at other taxation policies, such as higher taxes for the rich and inheritance tax for assets above RM10 million. It also projects saving RM20 billion by eliminating "wastage and corruption".

The opposition pact, at a news conference yesterday, said removing the GST would leave the government with a revenue shortfall of RM25.5 billion.

Without GST, the prices of goods and services would go down, and lead to a boom in consumption and business activities, it said.

To replace the tax, the opposition plans to bring back the narrower-focused SST in the short haul, while it looks at other taxation policies, such as higher taxes for the rich and inheritance tax for assets above RM10 million.

It also projects saving RM20 billion by eliminating "wastage and corruption".

This includes slashing by half the almost RM16 billion now allocated to the Prime Minister's Department.

"We want to put more money into people's hands, to bring down the cost of living, to build a better public transport system... We are committed to eliminating leakages," said opposition MP Wong Chen, PH's 2018 Budget chief.

The opposition pact also promised toll-free highways, free tertiary public education, affordable public transport and housing, and targeted fuel subsidies for the poor.

"It's not a populist Budget because what's fundamentally wrong with the country today is that wages are too low, capital flight is intense, brain drain is killing the economy," said Mr Wong.

PH would continue the controversial policy of paying out cash handouts called BR1M (Bantuan Rakyat 1Malaysia, or 1Malaysia People's Aid) but with stricter conditions attached.

Critics say BR1M, which cost the government RM6.8 billion this year, is an unproductive use of funds.

A version of this article appeared in the print edition of The Straits Times on October 26, 2017, with the headline 'Pakatan vows to remove GST'. Print Edition | Subscribe