Home  >  Opinion

GST, two years on

  • Two years on, BN's plan does not seem to work and the economy is not getting any better.

By LIM SUE GOAN
Sin Chew Daily

Two years since the government implemented the GST on April 1, 2015, do Malaysians get used to it now?

Goods prices have been on the rise and the people's consumption power is declining since the introduction of 6% GST. The CPI was up 4.5% in February while vehicle sale dipped by 13% to 580,124 units last year, the lowest in six years. With bank loan rejection rates up to 70%, the percentage of unsold new units by REHDA members soared to a high of 61% during the first half of 2016, compared to 48% a year ago.

The BN government had anticipated that two years after implementing the GST, the national treasury would be fattened, the rakyat would be suitably adapted to the new policy and negative sentiments would be minimized so that the general elections could be held any time.

But things don't work out that way. The public still don't find themselves used to the GST after two years, especially with goods prices skyrocketing and salary growth stagnant, making the 6% universal tax an added burden.

To be honest, higher goods prices could not be wholly attributed to the GST alone, other factors have also contributed to uncurbed rising prices, including the abolition of subsidies, depreciation of ringgit as well as higher rents and worker salaries.

Fuel subsidies were completely removed in December 2014 and replaced with a managed float mechanism. If the international oil prices remain sluggish, it wouldn't be a problem if ceiling prices of fuels are announced weekly. However, after OPEC and other oil producing countries sealed an agreement on production cut late last year, oil prices have been going up steadily, culminating in the 4.5% inflation rate in February, substantially higher than bank interest rate.

The government lacks an effective strategy to curb inflation and reduce Malaysians' cost of living. Statistics show that the February food and non-alcoholic beverage index, which makes up 30.2% of the CPI, jumped 4.3%. If the government had focused on agricultural production, we should have been able to cap the inflationary pressure by cutting down food imports.

Subsidy rationalization has not only impacted the livelihood of the people, but has also raised the production cost of businesses. For instance, traders are transferring their increased overheads to consumers as a result of dearer industrial gas.

The government bagged in RM41.2 billion from GST collection last year, but this amount has been largely used to plug the massive hole of government expenditures while only a small fraction has been set aside for BR1M and hardly anything to stimulate the national economy.

By right with such an impressive GST collection the government should have brought down vehicle taxes, as exorbitant car prices have squeezed the wallets of the medium- to lower-income groups, depriving them of the ability to spend.

Indeed the GST has served as a lifeline for the federal government, but unfortunately the government fails to institute a cautious and prudent fiscal policy to allow the GST proceeds to manifest its economic-boosting effects to lift the country's overall competitiveness.

Even as the government has slashed the expenses of various departments, the finance ministry lately sought parliamentary approval to increase RM3.081 billion in fiscal budget. Such overruns seem to have evolved into an annual event, showing that the government has never managed the finances seriously.

The government plans to introduce the Employment Insurance Scheme (EIS) this July with the premiums being paid annually by both the employers and employees. The government is not going to shoulder the burden in any way.

No doubt the government has been working very hard to lure foreign investments, including a Digital Free Trade Zone to be jointly established with the Alibaba Group of China, while Saudi oil company Aramco has pledged to invest US$7 billion in the RAPID project in Pengerang. The effects of these mega investments will nevertheless not materialize within a short period of time. Moreover, to enhance the incomes of Malaysians, the government must decisively implement structural reforms in a bid to stimulate economic expansion.

Consumption power has yet to return to the levels two years ago because we have not done enough in introducing economic reforms over the period. Local businesses are still very much labor-intensive and dependent on foreign workforce, while the government still carries on with its decades-old racial policy instead of meritocracy.

Large sums of money must be invested in order to jumpstart near-term economic development, but unfortunately the government does not have the financial ability to do so. As such, it still has to bear the pains of reform.

Two years on, BN's plan does not seem to work and the economy is not getting any better. How to call an election this way? The truth is not something one can easily change with loads of political propaganda.

 

Copyright © 2017 MCIL Multimedia Sdn Bhd (515740-D).
All rights reserved. Contact us : [email protected]