Understanding Malaysian inflation and why GST must come in?

Budget aiming towards GST
Oct 14 2012 by Mohd Ariff
Source: FMT

The Minister Najib Tun Razak’s 2013 Budget wasn’t worth a debate. In fact Barisan Nasional MPs spent more time debating Anwar Ibrahim’s budget than their leader’s. Why aren’t the BN MPs debating their own budget? Because it contains a lot of silly things. The question is how is Najib going to implement his last minute add-ins?

Take for instance the reduced travel fares meant for senior citizens and those who earn RM2,000 or less a month? How will Najib’s people implement that? Will commuters have to carry their pay slips when travelling on buses, trains and airplanes and have them shown to conductors? Or will some people supply buses with card readers which can read MyKads to verify the holders’ income?

Then there’s a plan to build “affordable” homes which seriously not many people can actually afford because they earn RM3,000 or less a month? Silly ideas don’t you think? I can only assume that the RM1.5 billion allocation was meant only for BR1M?

Then there’s Najib’s plan to raise disposable income. Let’s compare Najib with Anwar’s plan to make disposable income.

Aiming to implement GST

Najib is giving out goodies in preparation to introduce a goods and services tax (GST) if BN wins the 13th general election. That seems to be his solution to increasing revenue, now that the present tax base has been reduced. Anwar, on the other hand, plans to raise disposable income through fiscal reform measures such as cutting the triple import taxes on foreign-made cars, abolishment of tolls and waiver of student loans. Anwar proposed to raise disposable income through measures that are aimed at plugging leakages that arise as a result of inefficiencies and corruption.

The government, which has run a budget deficit every year since the 1997 Asian financial crisis, sees the deficit shrinking on better tax collection and slightly higher economic growth of 4.5-5.5 per cent in 2013 from 4.5-5 per cent this year. And what does better tax collection mean? Where will the increase revenue come from? Well, Petronas contributes up to 45 per cent of the government’s revenues for the moment. But what will happen when earnings from Petronas decline? The government says it wants to introduce a GST to widen the revenue base in a country where only about 10 per cent of the workforce pays income taxes and to cut the fuel subsidies that are among Asia’s highest. But to do that Najib has said more time is needed to prepare the public for such “unpopular steps”. And how does the government ‘help’ us prepare? By removing subsidies.

Soaring prices

Just look around, the price of sugar has gone up as a result of subsidy in sugar being withdrawn. The price of ikan kembong has settled around RM17 per kilo. The bag of 10kg price has gone up by RM7. The price of beef is around RM24-26 per kilo in certain parts of the country. Aren’t all these included in the basket of goods when accounting for the official rate of inflation? All food and beverage using sugar as its ingredient will go up in price. Will the increase in the price of sugar appease the makcik and the small traders selling foodstuffs using sugar as a main ingredient?

They know when the price of sugar goes up, the person holding the monopoly on sugar will get richer. And how does this government justify the withdrawal of sugar subsidy which results in sugar price going up? The government claims it is alarmed at the growing incidence of diabetes among Malaysians! Najib’s economic minders seemed oblivious to market signals. They keep supporting our economy by intervening believing they can tame market forces.Maybe they learnt economics from Ibrahim Ali (Perkasa).

The writer is a former Umno state assemblyman but joined DAP earlier this year. He is a FMT columnist. The article is purely an opinion of the writer.

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