GST will hurt informal business, not illegal trade, MP tells deputy minister

KUALA LUMPUR, Feb 26 — The goods and services tax (GST) will harm the earning capacity of Malaysians running informal or small businesses and not on the black economy as claimed by a deputy minister, DAP lawmaker Liew Chin Tong said today.

The Kluang MP said it was “absurd” for Deputy Finance Minister Datuk Ahmad Maslan to claim that GST will slash the size of illegal businesses and transactions to 10 per cent of the nation’s gross domestic product (GDP) from the current estimate of 30 per cent.

“Ahmad Maslan either does not understand what the World Bank was talking about when it discussed the informal or shadow economy or he has never read about it at all,” Liew said in a statement.

“‘Black economy’ is something else that means illegal businesses and transactions. If 30 per cent of what is transacted in Malaysia are illegal, as alleged by Ahmad Maslan, then something is entirely rotten with the Malaysian legal system.

“How could the authorities sit back and do nothing if all these transactions are illegal?” he added.

Yesterday, national new agency Bernama reported Ahmad as claiming that GST would clamp down on the black economy by trimming down on the number of tax evaders and defaulters.

He cited the World Bank in claiming that the black economy – which covers untraceable and untaxable business dealings – amounted to 30 per cent of GDP, and criticised the opposition for “protecting” the black economy by pushing for the sales and services tax to be retained.

Liew today said Ahmad was mistaken in his claim, arguing that the World Bank was referring to small business owners such as hawkers whose income are typically not taxable as they earned little.

Liew stressed that GST will only add more pressure on the informal economy as their meagre profits would end up paying for taxes and higher costs.

“I have long complained that we do not need a propagandist at the Finance Ministry, certainly the grave error in the Deputy Minister’s statement shows that he is nothing more than a propagandist and lacks economic understanding.

“This is worrisome for the nation. Now more than ever, we need leaders who understand economics and can propose viable solutions, or are at least able to read the various economic reports properly,” Liew said.

The GST will be levied at a rate of 6 per cent beginning April 1.