Economist: Govt must consider re-introducing GST in Budget 2023, plug leakages, inefficiencies

The re-tabling of Budget 2023 next month will be the acid test for Datuk Seri Anwar Ibrahim’s government, in introducing new, realistic, and potentially unpopular fiscal policies necessary to send out the right signals to both domestic and foreign investors.

Veteran economist Tan Sri Ramon Navaratnam said the overriding consideration is the integrity of the budget. The new administration must ensure that the budget addresses the people’s needs without increasing the national deficit or debt.

“We must increase revenue and plug any wastage, inefficiencies or loopholes across the board,” said Navaratnam.

“We must also raise taxes, by increasing the rates for the higher income groups… and we definitely need the GST (Goods and Services Tax).”

First introduced in 2015, the GST was subsequently scrapped and replaced by the Sales and Services Tax in 2018 by the Pakatan Harapan government.

Deputy Finance Minister Datuk Seri Ahmad Maslan today said the government had not discussed the re-introduction of the GST since the unity government was established, although 83 per cent of countries in the world used the taxation system.

Instead, Ahmad Maslan said the government was looking at ways of increasing income without having to implement new taxes – by tightening controls and plugging leakages, including the smuggling of goods.

Navaratnam however, said a full consultation with stakeholders, including industry players, was crucial in minimising administrative problems that could arise as a result of the re-introduction of the GST.

“They must speak up and say if they are for, or against the GST, so refinements can be made. We can’t just throw the baby out with the bathwater,” he said.

“Those in power too, must make sure that GST is acceptable to all. If people say it’s a burden, then refine it.”

He said the argument that GST would lead to price increases with the end cost being passed on to consumers, was a “big mistake”.

“Higher prices are not due to taxation alone. We need to review the economic structure. If the prices of food like eggs, vegetables, and chickens are expensive, we must ask why supply is not being increased. Is it due to preferences, lack of licences, land, or competition?” he asked.

“The government must look at this comprehensively and not from a myopic point of view,” he said.

Navaratnam, a former deputy secretary-general of the Treasury, added that revenue was not the only concern. Overall expenditure of the budget was also important.

“Focus on targeted subsidies… the budget must emphasise on initiatives that will help the poor. Corporate tax should also be increased, especially for big companies.

“Don’t tax the poor, tax those who can afford it,” he said, adding that inflation too, must be looked at from a macro point of view.

Navaratnam also said that for Malaysia to remain competitive, the government must ensure that it commits itself to policies that favoured all Malaysians.

“It’s not a mystery as to what needs to be done. Civil servants are well-equipped and have been preparing budgets for years.

“We do not need to reinvent the wheel. It’s just a question of will. It boils down to whether we want a fairer society, offer a competitive business environment, lower the inflation rate, and reduce corruption,” he said.

Budget 2023 will be re-tabled on Feb 24.