GST has the hallmarks of good governance
To get its foothold into the corridors of power in 2018, the then opposition opportunistically promised the reversal of the unpopular goods and services tax (GST) and the abolition or reduction of tolls, amongst others, to swing public opinion in its favour. Suffice to say it was self-serving and served its purpose. GST was rolled back and replaced with a less efficient sales and service tax. It not only brought in lower taxation revenue but more importantly, allowed for “leakages” along the supply chain. This is attributable due to a fundamental flaw in its design given that products are not taxed at each stage of the value added process. It allows for legitimate tax avoidance. The argument that it is regressive and affects the poor disproportionately, led to the 1Malaysia People's Aid (BRIM) payments to specific target groups to offset the effects of higher prices. It must also be borne in mind that a plethora of goods widely consumed by the lower earning group fell into the zero-rated GST bucket. This addresses the high road moral standpoint of whether it is “fair to tax those in abject poverty”. One must remember that many strides have been made over the years to eradicate poverty. The "hard core poor" are now at a relatively low percentage. We must remember that our conventional tax source from corporations on their profits and salary deductions is still at a relatively low penetration percentage. Of concern is that many persons who should rightly be paying tax are "off the radar". GST addresses this blind spot holistically and covers this segment. The aversion and abhorrence to GST, unfortunately, was fuelled by its inept implementation on rollout, namely on delays in refunds. It has done irreparable damage to GST as an efficient tool for taxation to fortify the financial robustness of the nation. Just a comparison with other markets, first at Asean level, at Asian level and then globally will show the proliferation of the use of GST, warts and all, to strengthen tax revenues. Surely, Malaysia who, firstly, is not the lowest income level nation in the region, can’t be smarter than the rest of the world or have an economy that is so intrinsically unique that it defies GST logic. Surprisingly it is acknowledged publicly by those who are able to chart the course of the nation that GST is a transparent and efficient system. Petty politics, however, has shrouded the issue in a cloak of haziness, disinformation and ambiguity driven by the need for longevity in power. Citing "low levels" of income and waiting for it to rise to certain levels before reintroducing GST is akin to chasing a moving target. Debate will continue on what should be the "correct" level. More dangerously, it is also subject to moving the goalposts for political survival. Plugging leakages, which by itself, is a phenomenal task given the lack of accountability, integrity and trust at various levels in the supply chain, is also a moving target. What level of inevitable leakage is tolerable is the agonising yet unanswerable question; hence the time continuum is compromised! While there is verbal calisthenics on GST, the cost of servicing national debt has continued to rise as reflected in the budget apportionments to meet interest payments. It is noted that debt was inherited. It was channelled to expenditure, embedded corruption notwithstanding, to improve the lot of the populace. If GST was not rescinded, the math will show how much of the debt could have been retired earlier from the extra tax revenue collected. While posturing on good governance, limiting it to initiatives to combat corruption through addressing leaks in delivery, albeit commendable, should not in itself, be the primary focus or end goal. What is good for the nation in the long run is to ensure that tax revenue is optimised to fund the nation’s budget. Catering to populist policies to remain in power is self-serving. It is a sad reflection of abuse of power for personal or party gains and robs the nation and future generations. The nation cannot afford to compromise its revenue streams through outdated or less than optimal modes of tax collection. It only serves to stifle and asphyxiate our growth trajectory. Good governance is all about transparency, accountability, efficiency, integrity and trust. GST is right up the alley on this continuum. If it is business as usual without a rethink, then, as a nation, we have lost the plot. The views expressed are those of the writer and do not necessarily reflect those of FMT.