OCTOBER 10 — Here’s the truth, the GST is coming back.
Dressed in a different name, but do not mistake it, taxes are coming Malaysian’s way.
But there’s boon from the bane, in that it may turn Malaysians into better citizens.
Time travel to 2015, and realise it was not fun for Najib Razak to introduce the consumption tax.
It took two years for Customs to ready all parties, and their officials would have been livid last year when Pakatan Harapan dismantled it. The SST (Sales and Services Tax) replaced it this year.
Why would Najib not want a consumption tax which affects all? Because it hurts at the polling booth, and it did just that in 2018.
In a feudal system, the best means to remain in power is to not tax the voting base, period.
But money does not grow on trees. And governments cost money.
However, for a while, it did come out from the ground and sea, thanks to oil. Malaysia’s surplus from petroleum coincided with the first rule of Mahathir Mohammad in the 1980s. Oil, palm oil and the FDI-fuelled manufacturing formed the economic trinity.
Let’s slow down and explain a few things at this juncture, why the fear monger over GST succeeded and our experience with taxes before returning to the uncertain present.
Never a taxpayer
Most Malaysians don’t pay income tax, they don’t earn enough. The reminders about B40s —households with joint-salaries below RM3,000 — are never far when under a populist government. That’s not to mean they do not contribute, the poor. They’ve built the country as much as anyone.
But there is no conscious process in which they part money to the federal government as evidenced in their payslip. It affects a person’s psyche when government’s share is displayed on a print-out.
GST turned the game on everyone.
GST meant everyone paid through consumption. Buy car, pay GST. By Milo, pay GST. Everyone pays GST. It petrified and was easy electioneering fodder. Social media a shopping bill receipt picture, visualise the price differential and panic sets in.
Still, Malaysians weren’t earning enough, and knowing a tax targets them was painful. The deep-seated fears of taxes are drawn from both ignorance about its nature and low disposable income.
Why were Malaysians paid less?
The initial Mahathir administration attracted plantation and manufacturing by supressing wages. Capitalists benefit from cheap labour and Malaysia stayed competitive in the region.
While these underpaid workers were not paying government directly, their willingness to work for less, kept the economic engine running via manufacturer and plantation returns. As a trade-off, household and petrol subsidies from the government aided with cost of living.
That model is not applicable today.
Western Digital’s Petaling Jaya plant shutdown speaks of the shrinking of low-tech manufacturing across the federation. Further, Indonesia is the world’s leader in palm oil, and despite prices being similar to 20 years ago, the yield is lower in second-placed Malaysia.
Malaysian firms may own a lot of Indonesian acreage, but how that translates to tax revenue back home is for financial forensics. Crude oil prices may have recovered, but Petronas gradually operates more abroad, and Malaysia’s a net oil importer today.
Government has less cushion, than the 30 per cent it expects from Petronas to pay for operations.
It costs more, in a welfare state
From annual cash payments to low income earners to the new petrol subsidy cards in Semenanjung, together with a slew of populist promises, the operating expenditure is set to rise.
Friday’s Budget presentation would express that, as administration members have intimated about tax reform akin to GST.
Factor the financial burdens allegedly from misconducts by the previous regime, repaying 1MDB debts for instance, the administration must raise more revenue to match spending.
The prime minister said the revamped SST will collect more in time. Anwar Ibrahim, the heir apparent, says tinker and get better results. Whatever the language, they are envisioning more to be collected.
Taxes have to be paid by someone or entity. If it is business entities, they’d pass the cost back to consumers. To assume they’d absorb tax burden out of charity is naïve.
If it is the individual, income or consumption taxes notwithstanding, it will force discussions about appropriateness and means to increase their wages to offset new tax burdens.
As stated above, natural resources to allay expenditure stress will depreciate.
The math points to taxes.
The GST is not wrong and neither does it have to be anti-poor. The previous implementation mirrored a progressive tax regime. Basic necessities had lower or no tax rate, while luxury goods were hit with a premium. There is merit if it is well regulated and equally well communicated.
But this is not about choosing one tax over another, but rather to determine who falls in the tax bet. The rich should and must be taxed more, but the tax burden is set to exist for all.
Springs, democracy
There is a silver lining in taxing the masses, however little. It forces participation.
When Kuala Lumpur is decked with haphazard street-bulbs everywhere over a holiday, residents shrug it off as government money. Government can choose to do whatever it wants to with its own money.
The general comprehension is the money belongs to government, and not the people.
Which is untrue.
Almost two hundred and fifty years ago, crown subjects in the Americas fought for a free nation. The notion was taxation without representation in King George III’s court or parliament was tyranny.
The residents of thirteen colonies were not willing to pass their tax money to a ruler four thousand miles away, not unless they have power over their share.
If you have not caught the Netflix movie, the Americans beat the British and brought down statues of King George III.
This is why, taxes and representation possess a tight relationship.
For decades, in Malaysia, it has been representation without taxation.
There is a necessary sideswipe here.
The reason why the Malay Dignity Congress — from professors to undergraduates — presented demands in five areas: religion, politics, economy, education, and culture, without any care on how it’s paid, for underlines the disconnect.
Many Malaysians believe domination of representation means monopoly of benefits. Modern, functioning countries can’t operate like that. Wealth must be generated before it’s distributed.
Back to revenue building.
When taxation policies are in place, and all adult Malaysians see their tax ringgit passed to the tax collector, whether as consumption or income tax, their demands for better government will increase.
They’d be less inclined to just pass over funds to right wing zealots because they are loud and annoying, with no plan to grow the economy. In fact, they’d be doubly interested in using the funds to build the economy rather than please rent-seekers. They’d pay close attention to who’ll be managing the free breakfast programme for schools when the finance minister announces it tomorrow.
Nothing makes a person pay attention to the government they have more than the realisation they are paying for that very government whether they voted for them or not.
Which is why it won’t be all sour milk, when the government tries various ways to squeeze more out of the rakyat without calling it a “tax.” The last laugh, probably would be the rakyat’s.
* This is the personal opinion of the columnist.
