After GST was introduced, more Malaysian voters are asking: Where is our money going?

Malaysia introduced the goods and services tax in 2015.
Malaysia introduced the goods and services tax in 2015.PHOTO: EPA-EFE

SINGAPORE - The introduction of the goods and services tax (GST) in 2015 means that every Malaysian is now paying tax on daily items from the toothpaste they use to the Milo they drink.

This has raised people's expectations of accountability as they want to know how their money is being used, analyst Francis Hutchison told a forum on Thursday (April 19).

 

He identified the GST as one of two key features that have changed Malaysia's political landscape significantly ahead of the general election, the other being a further fragmentation of Malay-based parties.

Without the GST, fewer people would have felt the tax pinch because only 2.3 million Malaysians, or about 15 per cent of the workforce, pay income tax.

"People change: Once you start paying taxes, what you expect of the government also changes... If you are going to tax me, I want to see where the money goes," said Dr Hutchinson at The Straits Times Global Outlook Forum on Malaysia's upcoming election.

The senior fellow at the Iseas - Yusof Ishak Institute, who is also coordinator of its Regional Economic Studies Programme and Malaysia Studies Programme, outlined how structural changes in taxes and federal revenue have led to greater political pressure on the government.

First, the money coming from oil dropped from 40 per cent of federal revenue in 1997 to 14 per cent last year (2017).

Said Dr Hutchinson: "This means that 86 per cent of government revenue needs to come from firms and people, as opposed to coming out of the ground... It comes from the rakyat (people)."

Second, the introduction of GST means that everyone now pays tax, instead of only the top 20 per cent of income earners and the upper-middle class.

The lower-middle class, which found itself paying taxes for the first time, was hit the hardest because a third of their daily household items were not exempt from GST.

"Everytime you buy toothpaste, you top up your mobile phone, anything like that, you buy Milo, you are paying tax and you can see that in your receipt the first time," he said.

This unhappiness over the GST is a very effective tool for opposition forces such as the Pakatan Harapan alliance and Parti Islam SeMalaysia (PAS) to start asking where people's money is going.

By taxing people instead of oil, the government is forced to be more responsive to voters, Dr Hutchinson said.

"If taxes come from people, it is in your interest to make sure they have enough wages to have a surplus that you can tax... you cannot lose money through mismanagement and corruption," he added.

This is why the cost of living and the GST are such strong election issues, he noted.

Representation of Malay voters

Another fundamental change is in how Malay voters are being represented in politics.

 
 
 

The United Malays National Organisation (Umno) which was central to the coalition that led Malaysia to independence has ossified over time, with young leaders unable to rise quickly through the ranks and senior leaders ageing, said Dr Hutchinson.

And Umno now faces internal resistance when it wants to field younger leaders in elections.

Splits over the years have also seen other Malay-majority parties created over time: PAS, Parti Keadilan Rakyat (PKR), and more recently, PAS splinter Parti Amanah Negara, as well as former prime minister-turned-opposition-leader Mahathir Mohamad's Parti Pribumi Bersatu Malaysia (PPBM).

Malay voters now have these five choices across three political blocs, making their vote more about ideas and ideology rather than race, he said.

Dr Mahathir's PPBM has also attracted many urban, cosmopolitan people to join politics for the first time, with 55 per cent of the party's membership under the age of 35.

Said Dr Hutchinson: "Regardless of who wins or loses, Malaysian politics will change in (these) two fundamental ways."