MIER chairman Tan Sri Dr Kamal Salih speaks during a press conference in Kuala Lumpur October 1, 2019. — Picture by Yusof Mat Isa

KUALA LUMPUR, Oct 1 — Pakatan Harapan should reintroduce the Goods and Services Tax (GST) at a lower rate to safeguard government revenue against oil price instability, the Malaysian Institute of Economic Research (MIER) suggested today.

MIER chairman Tan Sri Kamal Salih said the GST was more effective than the Sales and Services Tax (SST) the government introduced as its replacement.

The proposal was among the items on MIER’s wishlist that they hoped would be implemented for next year’s federal Budget.

“I think they have to rethink their taxation systems, because when the last government introduced GST, it was after a lot of effort, and studies, and when the oil price was going down, GST (revenue) was what was keeping the government afloat.

“But now the PH government has abolished GST and I was one of those who counselled them against abolishing it because the SST system, no matter how you expand the sectors or despite the information system and enforcements, it will still not be enough to fulfil the requirement which was produced by GST.

“GST was a fair system; some people say it’s regressive because the poor will be affected, but we have got exclusion clauses that will keep or protect the lower income groups,” he said.

When asked, Kamal later explained it would be best to reimplement the GST as soon as possible, but conceded that it would have to be preceded with steady economic growth so it would not end up burdening the people.

He said GST at a lower rate would be feasible if reimplementation was on the cards, and not the previous rate of six per cent.

“Maybe at a lower level, but with subsidies on the other hand and support for businesses, I think you can have a package that can be a win-win all round and keep the cost of living down.

“I think it must be less than six per cent, not zero. Maybe one to three per cent would be ideal, three per cent was what I would have recommended,” he said.

“If you calculate three per cent of household income and businesses, how much is that already? There is a RM19 billion to RM22 billion gap from tax revenues when GST shifted to the SST,” he added.

PH had made it one of their main manifesto promises that the GST would be abolished if they are to take over Putrajaya during last year’s 14th General Election.

Following their historic victory, defeating Barisan Nasional, the GST was then zero-rated on June 1, 2018, and then removed and replaced with the SST on September 1, following a three-month-long tax holiday.

The GST was implemented by the previous Barisan Nasional administration at a six per cent rate, and came into effect on April 1, 2015 up until its abolishment last year.

Kamal also supported the idea of a capital gains tax for the rich, saying the more affluent should bear a larger burden compared to the bottom 40 per cent(B40).

“The difference between the top 10 per cent and the bottom 40 per cent is seven times, so they should bear a larger burden and then transfer it down to the B40 so that it’s a more acceptable distribution, that what’s Vision 2030 is all about.

On what he expects to be announced during the Budget announcement next week, Kamal said he foresees more initiatives aimed at reducing the cost of living being introduced.

He explained that cash aid programs like the Bantuan Sara Hidup (BSH) might be broadened to have a larger coverage that will affect those up to the bottom 50 per cent.

“I do not know for sure what kind of new initiatives, but they (the government) will probably strengthen the Bantuan Sara Hidup, maybe raise the levels in terms of its quantum and also the numbers that can benefit from it.

“Maybe a larger coverage beyond the B40, maybe up to the B50, who will be eligible for BSH, because they, the B40 and B50, at the top they are also vulnerable as many of them are unemployed because companies are closing,” he added.