KUALA LUMPUR, July 25 — The sales and services tax (SST) set to return in September is merely a "populist” move that will not benefit Malaysians in the long run, Umno’s Datuk Ahmad Maslan said.

The former deputy finance minister admitted that the goods and services tax (GST) introduced by the previous Barisan Nasional (BN) administration led by Datuk Seri Najib Razak had some problems relating to the input tax credit, but they were eventually fixed and made for a far more transparent taxation system that favoured citizens over time.

"This is just a populist move,” he told Malay Mail in a recent interview, referring to the SST.

"Firstly, the GST taxation system is more transparent. The people know they are paying tax. It’s in the receipt,” he said as he sought to poke holes in the new Pakatan Harapan (PH) administration’s argument to reintroduce the SST, the taxation system prior to April 2015, but with certain tweaks.

Ahmad insisted that that the shortcomings in the SST, most notably its lack of transparency, cannot be rectified and will lead to some businesses cheating the government by underpaying tax.

He argued that the SST is taken from factories, which would not be able to claim back its tax because its taxation system does not have the proper "input tax credit”.

He related that before the BN introduced GST, it had consulted with Customs experts from countries like Singapore, Australia and the UK who had likened the "input tax credit” under SST as akin to "giving a blank cheque to the businesses”.

"They said to make sure they don’t cheat, because they can overclaim.

"That’s why in the first year or two after GST was enforced, that problem still happened, whereby they were cheating in claiming this input tax credit,” Ahmad explained.

Based on their advice, he said the previous Finance Ministry under BN had a Memorandum of Understanding with the Customs Department and the Inland Revenue Board to share information and files.

"That's why when we see information which did not tally, between two departments, we suspect there is cheating, and therefore the input tax credit was reviewed.

"But in the end, as time passes, this GST is not a problem anymore, when we know the estimated amount of the claims that should be claimed,” Ahmad said.

In contrast, he said the country was at risk of developing a "black economy” due to the shortcomings in the past implementation of the SST.

"One more thing is the black economy. It happened during SST. For example, a company called ‘A’. It wants to reduce it SST. It has a chair that costs RM100. If they declare RM100, they have to pay RM10, right? They don’t declare it’s RM100. They show an invoice that it’s only RM50. To whom do they sell? To company B. Who is company B? Their own marketing arm. Therefore, the SST paid to the government is only RM5. It should be RM10.

"However with GST, even if it’s a marketing arm, it will still be taken into account,” he said.

Shortchanging government

The SST Bill is scheduled to be tabled in the Dewan Rakyat next Monday and is expected to be passed and implemented in September. Under the new tax regime, sales of goods will incur a 10 per cent levy while services will incur a 6 per cent rate.

However, the Pontian MP urged the PH government against abolishing the GST to make way for the SST.

According to Ahmad, the prices of goods and services will be more expensive than when the GST was in effect.

"SST is a non-transparent tax. People are not seeing that they are paying tax daily. People are not able to see, so they are not angry. I just want to tell the rakyat. What you don’t see, doesn’t mean it is not there.

"It shortchanges the government. This is not transparent. When it is not transparent, the collection of the government therefore reduces. When the collection is less, how to help the rakyat more?” he asked.

"Then they will start showing all the debts, blame 1MDB, claiming that it was all the previous government's faults. Everything would be Najib's fault, when it is because they don’t have enough money, because GST was not continued,” Ahmad added.