Public will get used to GST by end of year, PKR think tank says

KUALA LUMPUR, June 25 — PKR-backed think tank Institut Rakyat (IR) admitted today that most Malaysians will become used to the Goods and Services Tax (GST) by year-end, suggesting that time was running out for the opposition to milk the issue for political gain.

Despite noting that there was a “one-off” price spike after the consumption tax was implemented on April 1, the institute said the trend reverted quickly back to pre-GST levels as early as last month.

“While there will be psychological impacts on spending and consumer confidence in the short-term, the absence of runaway inflation means that consumers are likely to adjust to GST over the next six months,” said the summary of the report.

The IR report was released as an internal note for the party, but was distributed to the media today.

“Unless there are further problems with implementation or misallocation of GST revenue, it seems likely that GST will diminish as a political issue by the end of the year for the general public.

“The negative effects will indeed be ‘one-off’,” it said in its analysis.

According to data from the Department of Statistics, CPI for April increased by 0.9 per cent from March, but only 0.4 per cent between April and May, a fall of over 55 per cent.

The Customs Department has been insisting since 2013 that prices of eight categories in the Consumer Price Index (CPI) – that measures inflation rate – would fall after GST, with up to 2.71 per cent decrease in clothing and footwear prices.

“Given the actual CPI data this is untrue, any reductions in prices of sub-categories have been overtaken by overall increase in the parent category,” said the think-tank.

In its alternative budget tabled last October, then opposition pact Pakatan Rakyat (PR) had proposed that Putrajaya implement a Capital Gains Tax in place of GST, which could collect up to RM3 billion compared to GST’s RM8 billion.

PKR was among the organisers of the #KitaLawan May Day rally against GST last month, which saw over 30 individuals arrested, including PKR secretary-general Rafizi Ramli.

A survey by Institut Datuk Ehsan, a Selangor-run research institute, also claimed that public anger against GST was among the issues that helped PKR president Datuk Seri Dr Wan Azizah Wan Ismail clinch the Permatang Pauh by-election last month.

Malaysia’s GST rate of 6 per cent, which was rolled out on April 1 this year, is the lowest in the region, whereas most countries implement a 10 per cent value added tax.