‘Economy and finance are our main focus’
Experts: Parliament must repeal GST and pass law on Sales and Service Tax
PETALING JAYA: The economy, the country’s finances, the ringgit – and the Goods and Services Tax (GST). These will be the priorities of the new Federal Government under seventh Prime Minister, Tun Dr Mahathir Mohamad.
“The GST will be replaced with the Sales and Service Tax (SST). We don’t need the GST,” said Dr Mahathir told a press conference yesterday morning shortly after declaring that Pakatan Harapan had the majority in the Dewan Rakyat.
He said the Anti-Fake News Act 2018 would also be reviewed to determine if it was truly used to curb fake news or silence political opponents.
“We don’t want fake news, but the law should be studied again,” he added.
Later in the night, in his first press conference after being sworn in as Prime Minister, Dr Mahathir said the country’s economy and finances were his priority.
“We have a lot of things to do, but the economy and finances are the main things. We will focus on these two things,” he said.
He said his goal was to try and make the ringgit “as steady as possible”, and assured investors that Malaysia is in good hands.
“I would like to tell business people that they can push up the prices in the stock market. There is no cause of any devaluation of the ringgit,” he said.
Dr Mahathir said Malaysia will be a “business-friendly government” that is mooted through the Malaysia Incorporated Policy introduced in 1981.
He gave an assurance that the government had people experienced in economics and finance. “For a dictator, I’m a good listener,” he quipped.
“Among the people I have to listen to was Rafidah (former minister from Umno Tan Sri Rafidah Aziz). She makes herself get heard no matter what, and she came out in full force (during the campaign period) and that helped us a lot,” said Dr Mahathir.
He also thanked former Umno finance minister Tun Daim Zainuddin and former Negri Sembilan chief minister Tan Sri Rais Yatim.
Apart from dealing with the GST and “oppressive” laws such as the Fake News Act, the Pakatan government would also review the Security Offences (Special Measures) Act (Sosma), he said.
Dr Mahathir promised he would look into the country’s financial problems, adding that the Federal Government debt reaching RM1 trillion may not be an exaggeration.
However, he said the Pakatan government could get “most of the 1Malaysia Development Berhad (1MDB) money back”.
“We know the money is in America, Singapore and Switzerland. We have a number of people who have expertise in this area,” he said.
Dr Mahathir also said that the Pakatan government would study government officers and that some of them may be demoted.
Certain department heads, he said, “must fall”.
At the morning press conference, the prime minister also said previous investments and projects with China would be reviewed under the new government.
“We need to study all the things done by the previous government. It is not only about China, it’s about a lot of things within the country,” he said.
He added that the RM55bil borrowed by the previous government for the East Coast Rail Link was “a great burden on the country”, among other loans.
However, he noted that the government had no issues with the Belt and Road initiative, adding that he previously wrote a letter to Chinese premier Xi Jinping about the importance of having a land connection with Europe.
He said there was a lot of work to be done and that he would call for a Parliament session “very soon”.
The Pakatan Harapan presidential council meets today to discuss the formation of the Cabinet.
PETALING JAYA: Malaysia would be the first country to revert from the Goods and Services Tax (GST) to the Sales and Service Tax (SST).
The humongous effort can be carried out within the first 100 days of the new administration provided the necessary legal framework is in place.
Senior tax consultants said the law governing GST has to be repealed and a new law on SST has to be passed in Parliament.
“For this to happen, a Parliament sitting must take place. Legally the GST cannot be replaced with the SST overnight,” said the tax consultant.
The GST, which is based on a 6% rate, was implemented on April 1, 2015 based on the GST Act 2014.
The laws that governed the SST, which are the Sales Tax Act 1972 and the Service Act 1975, were repealed.
The abolishment of GST is the cornerstone of Pakatan Harapan’s economic plan.
In a press conference yesterday, Tun Dr Mahathir Mohamad reiterated he would go ahead with the move.
The chief executive officer of Tax Advisory and Management Services Yong Poh Chye said the sooner the promise to abolish the GST is done, the better it is for the new government.
“The people will feel the new government is serious in carrying out its promises,” he said.
Yong also said without GST, the general price of goods and services should be lower.
“There should also be strict enforcement to ensure shops lower prices to the pre-GST era. Otherwise the effect would not be felt,” he said.
He also pointed out the reintroduction of the SST should be easier because the tax has been implemented before. The SST was between 5% and 10%.
“We will not be reinventing the wheel,” he said.
Some experts had warned that rolling back the GST would be disastrous for the economy.
Rating agency Moody’s Investors Service cautioned abolishing GST without offsetting measures would increase Malaysia’s reliance on oil-related revenues and, in the near term at least, narrow the government’s revenue base.
Now on his sixth term in office, but the first time as a leader of a coalition of mostly former political nemesis, Dr Mahathir has achieved what many believed was the impossible – beating Barisan Nasional in a general election.
Pakatan leaders during their campaign in the run-up to GE14 had repeatedly said doing away with the GST will help reduce prices in the market.
The GST was implemented as part of former prime minister Datuk Seri Mohd Najib Tun Razak’s efforts to widen the country’s tax base.
GST collection in 2017 was RM42bil and is expected to increase to RM44bil in 2018. To compare, SST collection in 2014 was RM17bil.
Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar, who is also a former minister under Najib’s administration, said days before GE14 that abolishing the GST will force the Government to look at other ways to plug the income gap, or risk widening the country’s budget deficit.
“While good for the new government’s popularity, this will have a significant fiscal impact that can affect Malaysia’s risk ratings,” Francis Hutchinson, coordinator of the Malaysian programme at the Institute for Southeast Asian Studies in Singapore, told Bloomberg.