KUALA LUMPUR (Nov 2): The Barisan Nasional (BN) opposition coalition has presented its alternative budget for 2019 with an expected government revenue of RM247.18 billion, proposing to reintroduce a 3% goods and services tax (GST) and a slew of initiatives for new sources of government revenue. 

The document, however, did not specify the specific amount for the expected government expenditure for the year. When asked whether this would be a balanced budget, shadow finance minister Khairy Jamaluddin, who presented the “alternative budget”, said, “We are of the opinion now under Barisan Nasional, that while we seek to reduce the budget deficit, that (balanced budget) is not our priority right now.”

One of the key elements of the proposals, named the People’s Economic Initiatives (Inisiatif Ekonomi Rakyat), is to reintroduce GST at a lower rate of 3%.
“SST (sales and service tax) was not successful in lowering the prices of goods. That is why in order to have a transparent and efficient tax system, we suggest the reintroduction of the GST but at 3% compared with 6% previously,” he said, while presenting the alternative budget to the media in Parliament. 

The Rembau member of parliament estimated that the revenue collected under the reintroduced GST with a lower rate would be as much as under the SST, but would help shrink the issue of the black economy in Malaysia.

“However, we expect to increase tax collection from those evading tax under SST. From the leakage that can be avoided through the GST system, we expect that we can collect more than the SST with a lower tax rate at 3%,” he said.

It was noted during the presentation that the black economy in Malaysia is estimated to be worth RM30 billion. With the reintroduction of GST at 3%, Khairy said the government may gain RM20 billion in tax collection, leaving the black economy to be reduced to RM10 billion. 

BN is also proposing the establishment of a Fair Work Commission to ensure that wages for ordinary workers are reasonably proportionate to the salary of the employer or manager. Khairy said the commission should take into account various factors such as the sector and location of the company.

“So we will not have a [standard] minimum wage for the whole country. The commission will set a minimum wage based on companies, sectors, territories, and regions, as not all companies are able to pay a high minimum wage,” he said. 

Furthermore, BN proposed to restructure the income tax brackets by introducing new categories for individuals who earn over RM350,000 and RM500,000 a year which would be taxed at 30% and 32% respectively. Currently, the highest income tax bracket is for individuals earning more than RM250,000 a year. 

BN also suggested to introduce a wealth tax for individuals who accumulate beyond RM10 million yearly either through salary, allowance, property or investment.

“This is our effort to introduce a progressive tax system on the rich to be distributed to the poor, so that we can reduce the immense wealth gap in our country,” Khairy said. 

BN intends to introduce a Tobin tax imposed on short-term stock transactions to manage speculation that could pose a risk of uncertainty to the stock market. 

Other new sources of revenue that were suggested by BN included the restructuring of levy for foreign workers, a tax on overseas remittances, soda tax, carbon tax, and the plastic bag tax.

Besides the new tax measures, Khairy added that the government should revive infrastructure projects such as the East Coast Rail Link and the high-speed rail to generate job opportunities.

This article first appeared in The Edge Financial Daily, on Nov 2, 2018.

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