Malaysia may risk losing an eye-watering RM416.6 billion ($106.5 billion) in revenue if the proposal made by opposition party Pakatan Harapan to abolish GST, tolls and National Higher Education Fund Corporation (PTPTN) loans and excise duties is carried through.
In a statement posted on Barisan Nasional’s official website on Sunday (Mar 11), Ministry of Finance (MOF) secretary-general, Tan Sri Dr Mohd Irwan Serigar Abdullah said that the repeal would incur heavy multi-billion dollar losses.
These include losses from GST (RM45 billion), toll (RM338 billion), PTPTN loans (RM3.9 billion) and excise duties (RM2.4 billion).
“We will lose RM45 billion if we eliminate GST. It’s a big figure and we did not introduce it just like that, (but) we have been studying for years,” he said.
Malaysia’s current GST rate is 6%.
Irwan also expressed concern about recent newspaper and social media reports featuring current economic conditions.
“More than 500 basic items, among them, rice, sugar, vegetables and medical goods are not subjected to GST because the tax here is different from other countries,” he added.
If the country did not collect revenue, the Government would be unable to implement national programmes, he said.
The country can only bear the expenditure if the economy grows and revenue increases.
Even with the re-introduction of the sales and services tax (SST) to replace GST, a RM27 billion loss would be sustained.
The loss of revenue from tolls would also prove to be devastating.
In addition to MOF’s obligatory compensation payments to investors, the Government’s stepping in would mean forking out another RM338 billion, according to Irwan.
Coupled with the present national debt of RM688 billion, the total debt would amount to over RM1 trillion.
Malaysia has a policy whereby national debt should not exceed 55% of gross domestic product, which is currently at 50%.
For PTPTN loans, the government has provided relief.
“If the student’s score is good, he does not have to pay back PTPTN, and if it was consistent in paying, PTPTN will give 10% to 20% discount,” said Irwan.
He noted that Malaysia’s economy was on course in terms of financial management, with a 5.9% growth in 2017 and expectations of a continued 5-5.5% increment in 2018.