Tuesday, 9 March 2010

The Middle Ground: The brewing storm of GST

The brewing storm of GST


The Malaysian federal government intends to implement a General and Services Tax (GST) by the third quarter of 2011. Now you may ask what is GST and how will it affect you? I wondered too that is why I took the opportunity to attend the GST Forum organized by PR (mentioned in my previous post) and listened to those who provided an opposing view to that of the government's propaganda through the main stream media.

Let me add a qualifier here first. Before I went to this forum, I was of the opinion that GST is a form of taxation that Malaysia must take one day for the well-being of the country on the long run. However one thought kept bugging me which is corruption and leakages. I kept wondering if it was prudent to raise additional revenues for the government by taxing the length and breadth of Malaysian society (at the expense of those hardest hit - the poor) when the likelihood of these additional revenues may end up wasted or worst still in the pockets of a select few.

Of course I was also looking at it from a selfish point of view as a current taxpayer. Despite knowing that GST is a "good" form of taxation, I was apprehensive of being dealt the double whammy of paying GST and also paying income tax, taxing the poor tired 15% further!

Currently in Malaysia, only 15% of the 12 million workers pay taxes, ie. 1.8 million Malaysians are carrying the burden of supporting 27 million Malaysians. Not that the other 85% of Malaysian workers do not want to pay taxes but the reality is, they don't earn enough to be taxed - the sad fact of Malaysia being stuck in the middle income trap which experts and even the government realizes.

Ok, now you know where I stood on GST before 8.00 pm today, before I heard YB Tony Pua, YB Dr Dzulkefly Ahmad and En. Rafizi Ramli spoke tonight at the forum moderated by YB Liew Chin Tong.

I will not try to explain what GST is or how it works and how it affects EVERY SINGLE Malaysian as that will take too long. You have to find out yourself and believe me, you better want to find out as this GST thing is going to affect you in more ways than you have been told by the government propaganda machinery which in turn could and most likely will shape the political future of the country which has ramifications on life as we know it in Malaysia. It is that serious!

Think of it this way. Everybody knows whatever form of additional taxation is what most sitting governments would avoid unless it is absolutely necessary because of the backlash from the electorate. Did you know that when Canada introduced GST in 1991, the government was brought down at the following general elections in 1993? The political party who introduced GST in Canada eventually disbanded in 2004!

So why is the ruling BN government even contemplating this GST move given the present challenge to its rule by PR since 8 March 2008? Surely they are not suicidal nor do they have a death wish do they?

The simple answer is the country is going BROKE! The present economic model of affirmative action (of the selective kind) without expanding capacity is bleeding the country dry. Imagine this. Despite the huge bumper profits from Petronas these last five years, the BN government saw it necessary to operate an increasing budget deficit for the last 12 years! So much so that the nation's current debt is 50+% of Gross Domestic Product (GDP measured annually) and this is an untenable situation. Experts say that when a country's debt is around 65% of GDP, the country will no longer be able to sustain its interest payments without expanding its principal debt!

And we are close. Just imagine that in 2009 alone, we added another 7.4% of GDP to our national debt! Another two years of 7.4% and we would reach 65% of GDP and the downward spiral begins!

Unless the government finds new sources of revenues to contain and reduce the spiraling borrowings, our future borrowings is going to cost even more when our international risk rating drops further. Simply put, after 12 years of irresponsible fiscal management (when Malaysia's economic bubble burst in 1997), we are now spiraling downwards in a free fall.

Enough said on this and let us not dwell on the past of lost opportunities which our oil money could have done for us if used prudently and wisely and not on popularity measures to keep a political party/coalition in power.

Oil money which had financed 40% of our annual budget is running low. Please refer to my earlier posting on our oil money :
Malaysia's oil - 14.26 years left. Make sure you read the comment from an oil industry player about being a net importer of oil in 2 years!

Let us instead look at what the federal government could do before hardship is brought upon most Malaysians through GST.

The government has to make a choice, simple as that. Right now they are twiddling their thumbs because they are faced with an impossible situation - country or self and these two don't mix!

As rightly pointed out by the speakers from PR, why is the government reluctant to review the lop-sided agreements to the IPPs whilst at the same time considering raising utility rates which will only burden the rakyat further? Why is the government unwilling to acquire the north-south highway when PLUS recently declared a profit of RM1.3 billion when the government compensated them RM800 million for not allowing them to raise toll? As the speakers pointed out, the entire length of the north-south highway could be acquired by the government and the acquisition paid for in seven years if we didn't have to compensate PLUS yearly through lop-sided agreements!

Why are there no open tenders for government procurement when the Penang state government has shown that they could turn around a RM34 million budget deficit for 2008 (estimated by the previous BN government) into an RM80+ million surplus in the same year!

There are many more examples of silly wastage and inefficiencies of the delivery system by way of patronage, cronyism, corruption, and what have you simply because those who manage our national economy are in a limbo. Don't believe me? Read the Auditor-General's latest report. If there were no inefficiencies and leakages in government spending, RM28 billion could be saved!

RM28 billion which could postpone the GST until after the 13 GE!!!

Simply put, UMNO/BN knows the country is in trouble but to cure Malaysia from her ills would mean taking action against the very people they depend on to remain in power. They know that Malaysia cannot continue this way as eventually when the majority goes hungry, they will be out of power also. But what choice do they have if they want to continue to enjoy the perks of power if not to push the buck to gullible and indifferent Malaysians?

After all we allowed them, those who took the easy way out of "not wanting trouble' and "looking after the rice bowl"! Which brings me back to the 15% of tax paying Malaysians. We are in an unenviable position, to push the load of sustaining the country to the other 85% (who will be harder hit than the privileged few) or to continue remaining silent but under our breath, curse the UMNO/BN system of governance for our woes?

Will you take the trouble to understand GST and all its implications for the country or will you simply shrug your shoulders and say "qua sera sera"?

As the representatives from PR said, they are not against GST per se. They only oppose it because GST should be a last measure which will inevitably bring more hardship on Malaysia's poor when other measures to curb the leakages and corruption has not been explored yet, really explored with political will even if it means undermining the "base" on which the ruling elites depends on to remain in power.

Sad isn't it when we all (ruling elites included) know that we as a nation is in serious trouble but are are unwilling to make a righteous move to correct it. Why? All because of power, fear, and the need to keep our stomachs full.

The forum ended at 10.30 pm and as I left the venue to get some dinner, I couldn't help but thinking we are in for some hard and tumultuous times (which might tear at the very fabric of our multi-racial society) if this GST is not postponed until UMNO/BN and their broken way of governance is put to a stop.

As YB Dr Dzulkefly Ahmad put it, the insistence of the BN government to go forth with the implementation of GST would be a boon to PR, much more than the jailing of Anwar could in Sodomy 2! So then why are they trying so hard to educate ordinary Malaysians to rise and protest against GST? Wouldn't it be better if they let UMNO/BN bite the rakyat where it hurts most and pave the way for PR to Putrajaya?

The sad fact is whilst those like I who want to see an end to racial politics of the UMNO/BN kind, also realizes that it may be too late then when the 65% debt ratio is breached come when PR inherits the federal government at the next GE.

Such is the complexity of Malaysian politics and governance that we the poor electorate is forever asked to juggle between real and propaganda. Tough shit really when both sides overplay their hands without care for the rakyat who only want simple truths!

Anyway in closing, when I left the forum at 10.40 pm, I felt that I was much the wiser for having attended the forum and whilst still believing that a GST form of taxation is the way forward for Malaysia, I concede that we must defer its implementation so long as UMNO/BN are not willing to sacrifice themselves so that Malaysia could prosper for the sakes of us all.

I will from henceforth, devote a large portion of my blog to GST and all its implications until those who fear it most do the right things to prevent hunger on a widespread scale which will inevitably be played up on the racial scenario.

All I can say is watch your pockets and and remember how much debt you want your descendants to carry. Please don't come complaining to me when you have to pay more for your "char koay teow" when the shit hits the fan!

The onus is upon us and are we that stupid not to see all the warning signs of an economic policy gone wrong?

I refuse to be stupid anymore even if it means I have to "thump" table with friends who are seduced by Najib's 1 Hollow Malaysia!

Ps. Doc Edu, this is only 25% of what I have to say about GST! You know what I mean without being long winded, I hope! 1Malaysia? IT IS AN ILLUSION!

A very sad illusion!
Which those from our midst still can't see! Know what? I don't blame them but ourselves for not being able to to convince those whom we see daily!!!

Perhaps it is time time to change our "friendship" protocol?