‘Implementing GST now could worsen inflation’

KUALA LUMPUR: If the goods and services tax (GST) is implemented now, it could lead to drastic increases in the prices of goods and worsen inflation, said former second finance minister Datuk Seri Johari Abdul Ghani.

This, he said, was because the present economic situation is uncertain. “At times of economic uncertainty, if the GST is introduced, it will lead to a price spike.

“When the GST was implemented previously, there was a drastic increase, and it’s called a one-time increase in stocks and raw materials,” said Johari in Parliament.

Johari responded to Datuk Dr Ku Abd Rahman Ku Ismail (PN-Kubang Pasu), who interjected the Titiwangsa MP’s speech on the King’s decree in Parliament yesterday.

He said if the GST was to be reintroduced, it must be done at a suitable time.

Johari said he agrees with the GST taxation system introduced during the former Barisan Nasional administration in 2015 to curb the “black economy”.

“This was the best system then, and indirectly, it increased government revenue.”

The black economy comprises those who evade taxes or do not pay the appropriate taxes. It accounted for 18.2% of the GDP or almost RM100bil in 2019.

Prime Minister Datuk Seri Anwar Ibrahim told Parliament yesterday that Putrajaya has no plans to reintroduce a GST or any other broad-based consumption tax.

Instead, he said, the government will reduce subsidies enjoyed by the wealthy.

Johari stressed the importance of implementing targeted subsidies with the right mechanisms.

“Otherwise, we will forever face the issue of subsidies benefiting groups that are not supposed to be receiving them.”

Johari also said Malaysia had higher tax revenues before the Covid-19 pandemic.

“However, from 2019 to the present, tax revenues that would have expanded the economy have fallen to 11.1% of GDP from 15%.”

In his speech, Johari was concerned about the present economy, saying the country was lagging behind neighbouring countries.

Johari said gross domestic product growth was 5% annually between 2017 and 2018.

However, from 2020 to 2022, Johari said the GDP only grew an average of 1.9% each year.

Johari said Malaysia lags behind Indonesia, Singapore and Vietnam’s economic growth.

“What is worrying is that GDP growth for Q4 of 2022 showed a decline of 2.6% compared to Q3 that year,” said Johari.

Citing the World Bank’s forecast, he said Malaysia’s economy would grow 4% this year and 3.9% next year, which is lower than the 5% growth registered before the pandemic.

The World Bank’s forecast for Indonesia, the Philippines, and Vietnam were between 4.8% and 6.5%, higher than Malaysia’s.

The World Bank and the International Monetary Fund (IMF) also predict a slowdown in global economic growth, which will affect South Korea and Japan, Malaysia’s main trading partners, said Johari.

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