KUALA LUMPUR, July 26 — The controversial goods and services tax (GST) would have helped the government reel in tax dodgers and reduce the loss of capital from the country, Pekan MP Datuk Seri Najib Razak asserted today.

The former prime minister, who introduced the consumption tax in April 2015, insisted the GST was the best initiative for the country’s economy and had considered the people’s wellbeing.

“GST was started on the basis of the more you spend, the more you pay. Since the rich spend a lot, they pay a large chunk of GST.

“It also helped to reduce, and impose tax onto the black economy, reducing tax evasion and illicit capital outflow,” he said while debating the royal address in the Dewan Rakyat.

“I also want to say here. A phenomenon, which is not known to public, is the issue of illicit capital outflow. This is closely connected to the transfer pricing between multinational companies (MNCs),” he said.

The GST prevented MNCs from booking revenue in lower-tax countries such as Singapore and Hong Kong for tax avoidance purposes, he explained.

Najib said this was also how his administration had been able to raise revenue for such programmes as the 1Malaysia People’s Aid (BR1M).

The former PM also said a planned pension increase he had announced ahead of the general election was no longer possible due to the new government’s insistence on switching back to the “populist” Sales and Service Tax (SST).

“I can give many examples, but when we see the new policies of the new government, will we go back to a yesteryear Malaysia, because now they say it’s a new Malaysia?” he said, before warning of another price shock when the tax is rolled out in September.

Finance Minister Lim Guan Eng recently conceded the GST was technically a more efficient system, but said it was hampered by issues such as delays in issuing refunds to businesses, which led most to raise prices more than necessary.

The PH government zero-rated the GST on June 1 ahead of the planned implementation of the SST in September, providing Malaysians with a three-month tax holiday on consumption.

Lim previously said the government planned to impose a 10 per cent tax on sales and 6 per cent on services.