Photo courtesy of The Malaysian Times
On the stroke of midnight June 1, 2018, Malaysia’s Goods and Services Tax (GST) became zero rated from its original 6% that was introduced in 2017 to much fanfare, confusion and profiteering.
The new Malaysian premier in a press briefing last week announced that a replacement Sales and Services Tax (SST) will be introduced in September.
According to market watchers and analysts, the zero rated GST relinquishes a RM21 billion revenue for the government and potentially increase the 2.8% deficit gap predicted for fiscal year 2018. The finance minister explained that higher than expected dividends from government linked companies (GLC) including Petronas, sovereign fund Khazanah and Bank Negara (Central Ban), as well rising oil and petroleum prices and earnings will mitigate any potential loss in revenue, while maintaining the 2.8% gap.
While the new government helmed by the Pakatan Harapan (Coalition/Alliance of Hope) political party has delivered on it pre-election promise of scrapping the hugely unpopular GST, it seems to be rather rash and some might say cavalier move by a fledgling government.
The nascent government has been doing all the right things, making good on election promises including the removal of the GST, release of jailed opposition party leaders and the Malaysian Anti-Corruption Council’s re-opening of investigation into the 1MDB case and Najib Razak.
However, speaking with market observers and local businessmen, one cannot help but feel a healthy dose of quiet skepticism about these moves. While many applaud and welcome the speed at which election promises are being delivered, some astute voices have pointed to jarring policy incongruences including the announcement of free World Cup telecasts on local terrestrial broadcast channel RTM and the penalties incurred in withdrawing from the High Speed Rail project with Singapore as ironic and comical even.
Photo courtesy of Malay Mail
The government has even launched a crowd funding programme called Tabung Harapan Malaysia to help narrow the deficit gap through contributions and donations from the citizens. This has had a tremendous amplifier effect of cultivating a deeper connection with the man or woman on the street/kampong. Stories and urban myths abound of average Malaysians including taxi drivers, businessmen, waiters, oddjob workers, finance professionals, doctors, students and many others contributing their minimum best to the fund (for hope).
Whatever happens the short term gains, are especially successful in buying time and space for the new government to organise and re-charge the economy and re-align society. As the stoic and learned voices explain, in conversations, “we have seen through the power of the people, what it means to choose our very own leaders – the leaders have seen this for themselves. We are secure and we know change can happen and for that we are proud and excited”.
Merdeka Malaysia! Malaysia Boleh.
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