HSBC: GST abolition a significant fiscal risk to economy

KUALA LUMPUR: The abolition of the Goods and Services Tax (GST), a key proposal by opposition Pakatan Harapan (PH), will be a significant fiscal risk to the economy if there are no offsetting revenue-generating measures, even if it is replaced by the former Sales and Services Tax (SST).

HSBC Group said GST was introduced in 2015, when oil-related dividends and royalties plummeted, and it allowed the government to gradually pursue fiscal consolidation while continuing to fund growing social expenditure.

“As of 2017, GST provided for 21.3 per cent of the government’s revenues compared with 13.1 per cent from total oil- and gas-related income, where prior to GST’s introduction, the SST only provided roughly 7.5 per cent of revenues.

“To put this all in context, without the incremental tax revenues from GST, the government would have run a deficit of 4.9 per cent of gross domestic product in 2017 as opposed to three per cent,” the banking group said in its recent Global Research report on the coming 14th General Election.

It said PH also proposed for the re-introduction of select fuel subsidies for motorbikes under 125cc and cars under 1,300cc.

“This will suggest higher budget deficits in the absence of off-setting revenues,” HSBC Group added. — Bernama