Analyst: GST has altered Malaysian politics

Tax and further splintering of Malay-based parties will have major impact at the polls

A goods and services tax notice displayed at a supermarket in Aeon Bukit Indah Shopping Centre in Johor Baru. With the introduction of the GST in 2015, every Malaysian is now paying tax on daily items. ST FILE PHOTO

The introduction of the goods and services tax (GST) in 2015 means 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 Hutchinson said yesterday.

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

"Regardless of who wins or loses, Malaysian politics will change in (these) fundamental ways," he said. 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 elections.

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. 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 as a third of the group's daily household items were not exempt from GST.

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

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

By taxing people instead of oil, the government is forced to be more responsive to voters. "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," added Dr Hutchinson. This is why the cost of living and the GST are such strong election issues, he noted.

Another fundamental change he identified is in how Malay voters are being represented in politics. The United Malays National Organisation (Umno) has ossified over time, with young leaders unable to rise quickly through the ranks and senior leaders ageing, he said.

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

Splits over the years have also created other Malay-majority parties: PAS, Parti Keadilan Rakyat and, recently, PAS splinter Parti Amanah Negara, plus former premier Mahathir Mohamad's Parti Pribumi Bersatu Malaysia (PPBM).

Malay voters now have these choices, making their vote more about ideas and ideology rather than race, he said, adding that PPBM has also attracted many urban, cosmopolitan people to politics, with 55 per cent of the party's membership under the age of 35.

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A version of this article appeared in the print edition of The Straits Times on April 20, 2018, with the headline Analyst: GST has altered Malaysian politics. Subscribe